CONVERGENCE TO IFRS FROM INDIAN GAAPIMPACT AND CHALLENGES

PRESENTED BY NOMAN AGASHIWALA (PG-FIN) 03

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CONVERGENCE TO IFRS FROM INDIAN GAAPIMPACT AND CHALLENGES A PROJECT SUBMITTED IN THE PARTIAL FULFILLMENT OF THE POST GRADUATE DIPLOMA IN MANAGEMENT TO THAKUR INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH BY Mr. NOMAN AGASHIWALA PGDM FINANCE !00"-#0 UNDER THE GUIDANCE OF PROF. JYOTI NAIR THAKUR INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH KANDIVALI (MUMBAI)
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CERTIFICATE
This is to certify that the study presented by Mr. NOMAN I. AGASHIWALA to THAKUR INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH in the partial fulfillment of the POST GRADUATE DIPLOMA IN MANAGEMENT under CONVERGENCE TO IFRS FROM INDIAN GAAP- IMPACT AND CHALLENGES has been done under my guidance in the year 2008-10

The project is in the nature of original work. Reference work and relati e sources of information ha e been gi en at the end of the project.

!ignature of the "andidate

#orwarded through Research $uide %&'T( )*(R

TABLE OF CONTENTS

Background of IFRS.................................................................................................................. 10 !cope of (#R!.......................................................................................................................................12 ,enefits of (#R!...................................................................................................................................18 *doption of (#R!.................................................................................................................................20 "hallenges of (#R!...............................................................................................................................22 There are se eral impediments and practical challenges to adoption of and full compliance with (#R! in (ndia. These are-................................................................................................................................22 1.The need for a change in se eral laws and regulations go erning financial accounting and reporting in (ndia. (n addition to accounting standards. there are legal and regulatory re/uirements that determine the manner in which financial information is reported or presented in financial statements. #or e0ample. the "ompanies *ct. 1123 determines the classification and accounting treatment for redeemable preference shares as e/uity instruments of a company. whereas these may be considered to be a financial liability under (#R!. The "ompanies *ct 4!chedule 5(6 also prescribes the format for presentation of financial statements for (ndian companies. whereas the presentation re/uirements are significantly different under (#R!. !imilarly. the Reser e ,ank of (ndia regulates the financial reporting for banks and other financial institutions. including the presentation format and accounting treatment for certain types of transactions.............................................................................................22 2.The recent announcement by the 7"* is encouraging as it indicates go ernment support for the timetable for con ergence with (#R! in (ndia. 8owe er. the announcement stops short of endorsing the roadmap for con ergence and the full adoption of (#R! that is discussed in ("*(9s concept paper. (n the absence of ade/uate clarity and assurance that (ndian laws and regulations will be amended to conform to (#R!. the con ersion process may not gain momentum....................................................................22 +.There is a lack of ade/uate professionals with practical (#R! con ersion e0perience and therefore many companies will ha e to rely on e0ternal ad isers and their auditors. This is magnified by a lack of preparedness amongst (ndian corporate as this project may be iewed simply as a project management or an accounting issue which can be left to the finance function and auditors. 8owe er. it should be noted that (#R! con ersion would in ol e a fundamental change to an entity9s financial reporting systems and processes. (t will re/uire a detailed knowledge of the standards and the ability to consider their impact on business transactions and performance measures. #urther. the con ersion process will need to disseminate and embed (#R! knowledge throughout the organi:ation to ensure its application on an ongoing basis...............................................................................................................................2+ ;

;.*nother potential pitfall is iewing (#R! accounting rules as <similar< to $enerally *ccepted *ccounting =rinciples in (ndia 4(ndian $**=6. since (ndian accounting standards ha e been formulated on the basis of principles in (#R!. 8owe er. this iew disregards significant differences between (ndian $**= and (#R! as well as differences in practical implementation and interpretation of similar standards. #urther. certain (ndian standards offer accounting policy choices. which are not a ailable under (#R!. for e0ample. use of pooling of interest method in accounting for business combinations..........................................................................................................................................2+ There is an urgent need to address these challenges and work towards full adoption of (#R! in (ndia. The most significant need is to build ade/uate (#R! skills and an e0pansi e knowledge base amongst (ndian accounting professionals to manage the con ersion projects for (ndian corporates. >e eraging the knowledge and e0perience gained from (#R! con ersion in other countries and incorporating (#R! into the curriculum for professional accounting courses can do this......................................................2+ ?ltimately. it is imperati e for (ndian corporates to impro e their preparedness for (#R! adoption and get the con ersion process right. $i en the current market conditions. any restatement of results due to errors in the con ersion process would be detrimental to the company in ol ed and would se erely damage in estor confidence in the financial system. ............................................................................2+ "ost #ormulae........................................................................................................................................;2 "onsistency of cost formulae for similar in entories.............................................................................;2 !tandard.................................................................................................................................................;3 "ash and "ash e/ui alents.....................................................................................................................;3 #ormat and content of cash flow statement............................................................................................;3 "ash flows associated with e0traordinary items....................................................................................;3 @isclosure of interest paid and recei ed................................................................................................;3 @isclosure of di idend paid...................................................................................................................;3 @isclosure of di idend recei ed.............................................................................................................;3 @isclosure of ta0es paid.........................................................................................................................;3 @isclosure of cash payments..................................................................................................................;3 Particulars.................................................................................................................................. 46 Particulars.................................................................................................................................. 47 !tandard.................................................................................................................................................;A !tandard.................................................................................................................................................;8 Re enue @efinition................................................................................................................................;8 2

4B6Termination ,enefits.........................................................................................................................2+ ,asic C=!..............................................................................................................................................28 "onsolidated #inancial !tatements D.................................................................................................21 #ringe ,enefit ta0..................................................................................................................................32 !cope.....................................................................................................................................................3+ @iscontinuing 'perations D...............................................................................................................3+ (ntangible *ssets D.............................................................................................................................3; ?seful life..............................................................................................................................................32 4B6"ontingent assets...............................................................................................................................3A 4B6Restructuring cost..............................................................................................................................38 Optional exe ptions.................................................................................................................. !0 7andatory e0ceptions .......................................................................................................................8+

ACKNOWLEDGEMENT

(t gi es me great pleasure to present before you. my final project report for the year 2008-2010.

( e0press my gratitude towards our director 7rs. 7rinalini Eohojkar. for gi ing us an opportunity to work on this report.

( take this opportunity to thank our respected project guide =rof. %yoti )air. for gi ing us an opportunity to undertake this project. 8er guidance has been in aluable to me to while preparing this report. !he pro ided us with aluable suggestions and e0cellence guidance about this industry. which pro ed ery helpful to me and helped me to gain theoretical knowledge as well as e0perience in the practical field.

>ast but not the least. ( am also thankful to "* )ikhil %oganputra for his aluable insights and sharing his e0perience on these topic. and to my friends. to all known and unknown indi iduals who ha e gi en me their constructi e ad ise. suggestions. encouragement. co-operation and moti ation to prepare this report.

N$%&' A(&)*+,&-&

4Thakur (nstitute of 7anagement !tudies and Research - =$6

E.ECUTIVE SUMMARY
The (nternational #inancial Reporting !tandards 4(#R!s6 issued by the (nternational *ccounting !tandards ,oard 4(*!,6 are increasingly being recogni:ed as $lobal Reporting !tandards. 7ore than 100 countries such as countries of Curopean ?nion. *ustralia. )ew Fealand. and Russia currently re/uire or permit the use of (#R!s in their countries. "ountries such as "hina and "anada ha e announced their intention to adopt (#R!s from 2008 and 2011 respecti ely. ?nited !tates of *merica has also taken-up con ergence projects with the (*!, with a iew to permit filing of (#R!-"ompliant #inancial !tatements in the ?! !tock C0changes without re/uiring the presentation of reconciliation statement. (n iew of the benefits of con ergence with (#R!s to the (ndian economy. its in estors. industry and the accounting professionals. the "oncept =aper has been de eloped with the objecti e of e0ploring The approach for achie ing con ergence with (#R!. >aying down a roadmap for achie ing con ergence with the (#R!s with a iew make (ndia (#R!-compliant. *nd also to study impact and challenges (ndia will face to con erge with (#R!. Eeeping in iew the comple0 nature of (#R!s and the e0tent of differences between the e0isting *!s and the corresponding (#R!s and the reasons therefore. the ("*( is of the iew that (#R!s should be adopted for the public interest entities such as listed entities. banks and insurance entities and large-si:ed entities from the accounting periods beginning on or after 1st *pril. 2011. (n order to get more clarity on these issues. we ha e taken e0ample of )*"(> 4)ational * iation "ompany (ndia >td.6.=roject studied the present accounting procedure in )*"(> and steps taken by them for con erging with (#R!. to

ACCOUNTING STANDARDS----OVERVIEW
* financial reporting system supported by strong go ernance. high /uality standards. and firm regulatory framework is the key to economic de elopment. (ndeed. sound financial reporting
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standards underline the trust that in estors place in financial reporting information and thus play an important role in contributing to the economic de elopment of a country. The (nstitute of "hartered *ccountants of (ndia 4("*(6 as the accounting standards-formulating body in the country has always made efforts to formulate high /uality *ccounting !tandards and has been successful in doing so. (ndian *ccounting !tandards ha e withstood the test of time. *s the world continues to globali:e. discussion on con ergence of national accounting standards with (nternational #inancial Reporting !tandards 4(#R!s61 has increased significantly.

The forces of globali:ation prompt more and more countries to open their doors to foreign in estment and as businesses e0pand across borders the need arises to recogni:e the benefits of ha ing commonly accepted and understood financial reporting standards. (n this scenario of globali:ation. (ndia cannot insulate itself from the de elopments taking place worldwide. (n (ndia. so far as the ("*( and the $o ernmental authorities such as the )ational *d isory "ommittee on *ccounting !tandards established under the "ompanies *ct. 1123. and arious regulators such as !ecurities and C0change ,oard of (ndia and Reser e ,ank of (ndia are concerned. the aim has always been to comply with the (#R!s to the e0tent possible with the objecti e to formulate sound financial reporting standards. The ("*(. being a member of the (nternational #ederation of *ccountants 4(#*"6. considers the (#R!s and tries to integrate them. to the e0tent possible. in the light of the laws. customs. practices and

business en ironment pre ailing in (ndia. The Preface to the Statements of Accounting Standards. issued by the ("*(. categorically recogni:es the same. *lthough. the focus has always been on de eloping high /uality standards. resulting in transparent and comparable financial statements. de iations from (#R!s were made where it was considered that these were not consistent with the laws and business en ironment pre ailing within the country. )ow. as the world globali:es. it has become imperati e for (ndia also to make a formal strategy for con ergence with (#R!s with the objecti e to harmonize with globally accepted accounting standards.

INTRODUCTION TO IFRS
B&/0(r$1'2 $3 IFRS ?sers of financial statements ha e always demanded transparency in financial reporting and disclosures. 8owe er. the willingness and need for better disclosure practices ha e intensified only in recent times. $lobali:ation has helped (ndian "ompanies raise funds from offshore capital markets. This has re/uired (ndian companies. desirous of raising funds. to follow the $enerally *ccepted *ccounting =rinciples 4$**=6 of the in esting country. The different disclosure re/uirements for listing purposes ha e hindered the free flow of capital. This has also made comparison of financial statements across the globe impossible. *n (nternational body called (nternational 'rgani:ation of !ecurities "ommissions 4('!"'6. to harmoni:e di erse disclosure practices followed in different countries initiated a mo ement. The capital market regulators ha e now agreed to accept (#R! 4(nternational #inancial

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Reporting !tandards6 compliant financial statements as admissible for raising capital. This would ease free flow of capital and reduce costs of raising capital in foreign currencies. 7ost jurisdictions that report under (#R!. including the C?. mandate the use of (#R! only for the listed companies. 8owe er. in ()@(*. (#R! would apply to a wider group of entities than their international counterparts. This is primarily because of a large number of pri ate enterprises getting co ered under the si:e criteria based on their turno er andGor their borrowing. "ompanies also may need to con ert to (#R! if they are a subsidiary of a foreign company that must use (#R!. or if they ha e a foreign in estor that must use (#R!. The policy makers in (ndia ha e also reali:ed the need to follow (#R! and it is e0pected that a large number of (ndian companies would be re/uired to follow (#R! from 2011. This poses a great challenge to the makers of financial statements and also to the auditors.

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M4&'+'( $3 IFRS (nternational #inancial Reporting !tandards 4(#R!6 is a set of accounting standards. de eloped by the (nternational *ccounting !tandards ,oard 4(*!,6 that is becoming the global standard for the preparation of public company financial statements. (#R! is a principles-based accounting system. meaning it is objecti e-oriented allowing for more presentation freedom. O564/7+84) $3 IFRS 7$ 2484-$9. in the public interest. a single set of high /uality. understandable and enforceable global accounting standards that re/uire high /uality. transparent and comparable information in financial statements and other financial reporting to help participants in the world9s capital markets and other users make economic decisionsH 7$ 9r$%$74 the use and rigorous application of those standardsH in fulfilling the objecti es associated with 416 and 42): 7$ 7&04 &//$1'7 $3: as appropriate. the special needs of small and medium-si:ed entities and emerging economies. 7$ 5r+'( about con ergence of national accounting standards and (nternational *ccounting standards and (#R! to high /uality solutions. S/$94 $3 IFRS 1. (*!, !tandards are known as (nternational #inancial Reporting !tandards 4(#R!Is6. 2. *ll (nternational *ccounting !tandards 4(*!Is6 and (nterpretations issued by the former (*!" and !(" continue to be applicable unless and until they are amended or withdrawn. +. (#R!Is apply to the general-purpose financial statements and other financial reporting by profit-oriented entities -- those engaged in commercial. industrial. financial. and similar acti ities. regardless of their legal form. ;. Cntities other than profit-oriented business entities may also find (#R!s appropriate. 2. $eneral-purpose financial statements are intended to meet the common needs of shareholders. creditors. employees. and the public at large for information about an entity9s financial position. performance. and cash flows.

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3. 'ther financial reporting includes information pro ided outside financial statements that assists in the interpretation of a complete set of financial statements or impro es users9 ability to make efficient economic decisions. A. (#R! apply to indi idual company and consolidated financial statements. 8. * complete set of financial statements includes a balance sheet. an income statement. a cash flow statement. a statement showing either all changes in e/uity or changes in e/uity other than those arising from in estments by and distributions to owners. a summary of accounting policies. and e0planatory notes. 1. (f an (#R! allows both a 9benchmark9 and an 9allowed alternati e9 treatment. financial statements may be described as conforming to (#R! whiche er treatment is followed. 10. (n de eloping !tandards. (*!, intends not to permit choices in accounting treatment. #urther. (*!, intends to reconsider the choices in e0isting (*!s with a iew to reducing the number of those choices. 11. The pro ision of (*! 1 that conformity with (*! re/uires compliance with e ery applicable (*! and (nterpretation re/uires compliance with all (#R!s as well.

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Pr$'$1'/4%4'7) $3 IFRS

I'74r'&7+$'&- F+'&'/+&- R49$r7+'( S7&'2&r2) (IFRS) IFRS # #irst-time *doption of (nternational #inancial Reporting !tandards IFRS ! !hare-based payment IFRS 3 ,usiness "ombinations 4Re ised6 IFRS ; (nsurance "ontracts IFRS < )on-current *ssets 8eld for !ale and @iscontinued 'perations IFRS = C0ploration for and C aluation of 7ineral Resources IFRS > #inancial (nstruments- @isclosures IFRS " 'perating !egments I'74r'&7+$'&- A//$1'7+'( S7&'2&r2) (IAS) IAS # =resentation of financial statements 4Re ised6 IAS ! (n entories IAS > "ash #low !tatements IAS " *ccounting =olicies. "hanges in *ccounting Cstimates and Crrors IAS #0 C ents after the balance sheet date IAS ## "onstruction "ontracts IAS #! (ncome Ta0es IAS #= =roperty. =lant and C/uipment IAS #> >eases IAS #? Cmployee ,enefits IAS !0 *ccounting for go ernment $rants and @isclosure of $o ernment *ssistance IAS !# The Cffects of "hanges in #oreign "urrency Rates IAS !3 ,orrowing "osts 4Re ised6 IAS !; Related =arty @isclosures IAS != *ccounting and Reporting by Retirement ,enefit =lans IAS !> "onsolidated and !eparate #inancial !tatements 4Re ised6 IAS !" (n estments in *ssociates IAS !? #inancial Reporting in 8yperinflationary Cconomies IAS 3# (nterests in %oint 5entures IAS 3! #inancial (nstruments- =resentation IAS 33 Carnings per share IAS 3; (nterim #inancial Reporting IAS 3= (mpairment of *ssets IAS 3> =ro isions. "ontingent >iabilities and "ontingent *ssets IAS 3" (ntangible *ssets IAS 3? #inancial (nstruments- Recognition and 7easurement IAS ;0 (n estment =roperty IAS ;# *griculture I'74r'&7+$'&- F+'&'/+&- R49$r7+'( I'74r9r47&7+$' C$%%+7744 (IFRIC)
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IFRIC # IFRIC ! IFRIC ; IFRIC < IFRIC = IFRIC > IFRIC " IFRIC ? IFRIC #0 IFRIC ## IFRIC #! IFRIC #3 IFRIC #; IFRIC #< IFRIC #= IFRIC #> IFRIC #"

"hanges in C0isting @ecommissioning. Restoration and !imilar >iabilities 7embers !hares in "o-operati e Cntities and !imilar (nstruments @etermining whether an *rrangement contains a >ease Rights to (nterests arising from @ecommissioning. Restoration and Cn ironmental Rehabilitation #unds >iabilities arising from =articipating in a !pecific 7arket - Jaste Clectrical and Clectronic C/uipment *pplying the Restatement *pproach under (*! 21 #inancial Reporting in 8yperinflationary Cconomies !cope of (#R! 2 Reassessment of Cmbedded @eri ati es (nterim #inancial Reporting and (mpairment (#R! 2 - $roup and Treasury !hare Transactions !er ice "oncession *rrangements "ustomer >oyalty =rogrammes (*! 11 - The >imit on a defined ,enefit *sset. 7inimum #unding Re/uirements and their (nteraction *greements for the "onstruction of Real Cstate 8edges of a )et (n estment in a #oreign 'peration @istributors of )on-cash *ssets to 'wners Transfers of assets from customers

S7&'2&r2 I'74r9r47&7+$' C$%%+7744 (SIC) SIC > (ntroduction of the Curo SIC #0 $o ernment *ssistance - )o specific Relation to operating acti ities SIC #! "onsolidation- !pecial =urpose Cntities SIC #3 %ointly "ontrolled Cntities - )on-7onetary "ontributions by 5entures SIC #< 'perating >eases D (ncenti es SIC !# (ncome Ta0es - Reco ery of Re alued )on-@epreciable *ssets SIC !< (ncome Ta0es - "hanges in the Ta0 !tatus of an Cntity or its !hareholders SIC !> C aluating the !ubstance of transactions (n ol ing the >egal #orm of a >ease SIC !? @isclosure - !er ice "oncession *rrangements SIC 3# Re enue - ,arter Transactions (n ol ing *d ertising !er ices SIC 3! (ntangible *ssets - Jeb !ite "osts

N442 3$r C$'84r(4'/4 ,+7* IFRS) (n the present era of globali:ation and liberali:ation. the Jorld has become an economic illage. The globali:ation of the business world and the attendant structures and the regulations. which support it. as well as the de elopment of e-commerce make it imperati e to ha e a single
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globally accepted financial reporting system. * number of multi-national companies are establishing their businesses in arious countries with emerging economies and vice versa. The entities in emerging economies are increasingly accessing the global markets to fulfill their capital needs by getting their securities listed on the stock e0changes outside their country. "apital markets are. thus. becoming integrated consistent with this Jorld-wide trend. 7ore and more (ndian companies are also being listed on o erseas stock e0changes. !ound financial reporting structure is imperati e for economic well-being and effecti e functioning of capital markets. The use of different accounting frameworks in different countries. which re/uire inconsistent treatment and presentation of the same underlying economic transactions. creates confusion for users of financial statements. This confusion leads to inefficiency in capital markets across the world. Therefore. increasing comple0ity of business transactions and globalisation of capital markets call for a single set of high /uality accounting standards. 8igh standards of financial reporting underpin the trust in estors place in financial and non-financial information. Thus. the case for a single set of globally accepted accounting standards has prompted many countries to pursue con ergence of national accounting standards with (#R!s. *mongst others. countries of the Curopean ?nion. *ustralia. )ew Fealand and Russia ha e already adopted (#R!s for listed enterprises. "hina has decided to adopt (#R! from 2008 and "anada from 2011. (nsofar as ?! is concerned. #inancial *ccounting !tandards ,oard 4#*!,6 of ?!* and (*!, are also working towards con ergence of the ?! $**=s and the (#R!s. The !ecurities K C0change "ommission 4!C"6 has mooted a proposal to permit filing of (#R!-compliant financial statements without re/uiring presentation of a reconciliation statement between ?! $**=s and (#R! in near future. *ppendi0 (( contains list of countries which re/uire or permit the use of (#R!s for arious types of the entities such as listed entities. banks etc. B4'43+7) $3 &/*+48+'( /$'84r(4'/4 ,+7* IFRS) There are many beneficiaries of con ergence with (#R!s such as the economy. in estors. industry and accounting professionals. The Economy

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*s the markets e0pand globally the need for con ergence increases. The con ergence benefits the economy by increasing growth of its international business. (t facilitates maintenance of orderly and efficient capital markets and also helps to increase the capital formation and thereby economic growth. (t encourages international in esting and thereby leads to more foreign capital flows to the country. Investors * strong case for con ergence can be made from the iewpoint of the in estors who wish to in est outside their own country. (n estors want the information that is more rele ant. reliable. timely and comparable across the jurisdictions. #inancial statements prepared using a common set of accounting standards help in estors better understand in estment opportunities as opposed to financial statements prepared using a different set of national accounting standards. #or better understanding of financial statements. global in estors ha e to incur more cost in terms of the time and efforts to con ert the financial statements so that they can confidently compare opportunities. (n estorsI confidence would be strong if accounting standards used are globally accepted. "on ergence with (#R!s contributes to in estorsI understanding and confidence in high /uality financial statements. The industry * major force in the mo ement towards con ergence has been the interest of the industry. The industry is able to raise capital from foreign markets at lower cost if it can create confidence in the minds of foreign in estors that their financial statements comply with globally accepted accounting standards. Jith the di ersity in accounting standards from country to country. enterprises which operate in different countries face a multitude of accounting re/uirements pre ailing in the countries. The burden of financial reporting is lessened with con ergence of accounting standards because it simplifies the process of preparing the indi idual and group financial statements and thereby reduces the costs of preparing the financial statements using different sets of accounting standards. The accounting professionals

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"on ergence with (#R!s also benefits the accounting professionals in a way that they are able to sell their ser ices as e0perts in different parts of the world. The thrust of the mo ement towards con ergence has come mainly from accountants in public practice. (t offers them more opportunities in any part of the world if same accounting practices pre ail throughout the world. They are able to /uote (#R!s to clients to gi e them backing for recommending certain ways of reporting. *lso. for accounting professionals in industry as well as in practice. their mobility to work in different parts of the world increases. B4'43+7) $3 IFRS ,y adopting (#R!. you would be adopting a <global financial reporting< basis that will enable your company to be understood in a global marketplace. This helps in accessing world capital markets and promoting new business. (t allows your company to be percei ed as an international player. * consistent financial reporting basis would allow a multinational company to apply common accounting standards with its subsidiaries worldwide. which would impro e internal communications. /uality of reporting and group decision-making. (n increasingly competiti e markets. (#R! allows a company to benchmark itself against its peers throughout the world. and allows in estors and others to compare the company9s performance with competitors globally. (n addition. companies would get access to number of capital markets across the globe. D+)&28&'7&(4) $3 IFRS @espite a general consensus of the ine itability of the global acceptance of (#R!. many people also belie e something will be lost with full acceptance of (#R!. #urther certain issuers without significant customers or may resist (#R! because they may not ha e a market incenti e to prepare (#R! financial statements. !ome other issuers may ha e to stick with e0isting $**= because it is re/uired for filings with other regulators and authorities. thus resulting in e0tra costs than currently incurred by following only e0isting $**=. *nother concern is that many countries that claim to be con erting to international standards may ne er get to 100 percent compliance. 7ost reser e the right to car e out
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selecti ely or modify standards they do not consider in their national interest. an action that could lead to incomparability D one of the ery issues that (#R! seeks to address.

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ADOPTION @ CHALLENGES OF IFRS

A2$97+$' $3 IFRS 7ore than 12.000 companies in almost 100 nations ha e adopted (#R!. including listed companies in the Curopean ?nion. 'ther countries. including "anada and (ndia. are e0pected to transition to (#R! by 2011. !ome estimate that the number of countries re/uiring or accepting (#R! could grow to 120 in the ne0t few years. 'ther countries. such as %apan and 7e0ico. ha e plans to con erge 4eliminate significant differences6 their national standards. (n (ndia. the ("*( has issued a document titled <"oncept paper of con ergence with (#R! in (ndia< to e aluate the need for (ndian $**= to change to (#R!. (n the paper. the ("*( notes that as the world globali:es. it has become imperati e for (ndia to make a formal strategy for con ergence with (#R! with the objecti e of harmoni:e with globally accepted accounting standards. (n respect of many ad antages to arious stakeholders i:. the economy. industry. in estors. and accounting professionals. it does caution that the con ergence would re/uire some fundamental changes to the corporate laws and regulations currently guiding the accounting and reporting space in (ndia. (n iew of the difficulties. which may be percei ed during adopting (#R!. the ("*( has decided that (#R! should be adopted for public interest entities from the accounting periods commencing on or after 1 *pril 2011. *dopting (#R! will likely impact key performance metrics. re/uiring thoughtful communications plans for the ,oard of @irectors. shareholders and other key stakeholders. (nternally. (#R! could ha e a broad impact on a company9s infrastructure. including underlying processes. systems. controls. and e en customer or lender contracts and interactions. *dopting (#R! by (ndian corporate is going to be ery challenging but at the same time could also be rewarding. (ndian corporate are likely to reap significant benefits from adopting (#R!. The Curopean ?nion9s e0perience highlights many percei ed benefits as a result of adopting (#R!. ' erall. most in estors. financial statement makers and auditors were in agreement that (#R! impro ed the /uality of financial statements and that (#R! implementation was a positi e de elopment for C? financial reporting 4200A ("*CJ Report on 9C? (mplementation of (#R! and the #air 5alue @irecti e96. The current decline in market confidence in (ndia and o erseas coupled with tougher economic conditions may present significant challenges to (ndian companies.
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(#R! re/uires application of fair alue principles in certain situations and this would result in significant differences from financial information currently presented. especially relating to financial instruments and business combinations. $i en the current economic scenario. this could result in significant olatility in reported earnings and key performance measures like C=! and =GC ratios. (ndian companies will ha e to build awareness amongst in estors and analysts to e0plain the reasons for this olatility in order to impro e understanding. and increase transparency and reliability of their financial statements. This situation is worsened by the lack of a ailability of professionals with ade/uate aluation skills. to assist (ndian corporate in arri ing at reliable fair alue estimates. This is a significant resource constraint that could impact comparability of financial statements and render some of the benefits of (#R! adoption ineffecti e. *lthough (#R! are principles-based standards. they offer certain accounting policy choices to preparers of financial statements. #or e0ample. the use of a cost-based model or a re aluation models in accounting for in estment properties. This could reduce consistency and comparability of financial information to a certain e0tent and therefore reduce some of the benefits from (#R! adoption. The (nternational *ccounting !tandards ,oard 4(*!,6 which is an international standard-setting body formulates (#R!. 8owe er. the responsibility for enforcement and pro iding guidance on implementation ests with local go ernment and accounting and regulatory bodies. such as the ("*( in (ndia. "onse/uently. there may be differences in interpretation or practical application of (#R! pro isions. which could further reduce consistency in financial reporting and comparability with global peers. The ("*( will ha e to make ade/uate in estments and build infrastructure to ensure compliance with (#R!.

21

C*&--4'(4) $3 IFRS There are se eral impediments and practical challenges to adoption of and full compliance with (#R! in (ndia. These are1. The need for a change in se eral laws and regulations go erning financial accounting and reporting in (ndia. (n addition to accounting standards. there are legal and regulatory re/uirements that determine the manner in which financial information is reported or presented in financial statements. #or e0ample. the "ompanies *ct. 1123 determines the classification and accounting treatment for redeemable preference shares as e/uity instruments of a company. whereas these may be considered to be a financial liability under (#R!. The "ompanies *ct 4!chedule 5(6 also prescribes the format for presentation of financial statements for (ndian companies. whereas the presentation re/uirements are significantly different under (#R!. !imilarly. the Reser e ,ank of (ndia regulates the financial reporting for banks and other financial institutions. including the presentation format and accounting treatment for certain types of transactions. 2. The recent announcement by the 7"* is encouraging as it indicates go ernment support for the timetable for con ergence with (#R! in (ndia. 8owe er. the announcement stops short of endorsing the roadmap for con ergence and the full adoption of (#R! that is discussed in ("*(9s concept paper. (n the absence of ade/uate clarity and assurance that (ndian laws and regulations will be amended to conform to (#R!. the con ersion process may not gain momentum.

22

+. There is a lack of ade/uate professionals with practical (#R! con ersion e0perience and therefore many companies will ha e to rely on e0ternal ad isers and their auditors. This is magnified by a lack of preparedness amongst (ndian corporate as this project may be iewed simply as a project management or an accounting issue which can be left to the finance function and auditors. 8owe er. it should be noted that (#R! con ersion would in ol e a fundamental change to an entity9s financial reporting systems and processes. (t will re/uire a detailed knowledge of the standards and the ability to consider their impact on business transactions and performance measures. #urther. the con ersion process will need to disseminate and embed (#R! knowledge throughout the organi:ation to ensure its application on an ongoing basis. ;. *nother potential pitfall is iewing (#R! accounting rules as <similar< to $enerally *ccepted *ccounting =rinciples in (ndia 4(ndian $**=6. since (ndian accounting standards ha e been formulated on the basis of principles in (#R!. 8owe er. this iew disregards significant differences between (ndian $**= and (#R! as well as differences in practical implementation and interpretation of similar standards. #urther. certain (ndian standards offer accounting policy choices. which are not a ailable under (#R!. for e0ample. use of pooling of interest method in accounting for business combinations. There is an urgent need to address these challenges and work towards full adoption of (#R! in (ndia. The most significant need is to build ade/uate (#R! skills and an e0pansi e knowledge base amongst (ndian accounting professionals to manage the con ersion projects for (ndian corporates. >e eraging the knowledge and e0perience gained from (#R! con ersion in other countries and incorporating (#R! into the curriculum for professional accounting courses can do this. ?ltimately. it is imperati e for (ndian corporates to impro e their preparedness for (#R! adoption and get the con ersion process right. $i en the current market conditions. any restatement of results due to errors in the con ersion process would be detrimental to the company in ol ed and would se erely damage in estor confidence in the financial system.

M4&'+'( $3 AC$'84r(4'/4B ,+7* IFRS

2+

,efore discussing the contours of the con ergence strategy with a iew to meet the abo e mentioned objecti es. the word Lcon ergenceI needs to be clearly understood. (n general terms. Lcon ergenceI means to achie e harmony with (#R!sH in precise terms con ergence can be considered to design and maintain national accounting standards in a way that financial statements prepared in accordance with national accounting standards draw unreserved statement of compliance with IFRSs (nternational *ccounting !tandard 4(*!6 1, Presentation of Financial Statements. which states that financial statements shall not be described as complying with (#R!s unless they comply with all the re/uirements of (#R!s. (t does not imply that financial statements prepared in accordance with national accounting standards draw unreser ed statement of compliance with (#R!s only when (#R!s are adopted word by word. The (*!, accepts in its Statement of !est Practice" #or$ing Relationships between the IAS! and other Accounting Standards%Setters& that Madding disclosure re/uirements or a remo ing optional treatment does not create noncompliance with (#R!s. (ndeed. the (*!, aims to remo e optional treatments from (#R!s.N This makes it clear that if a country wants to add a disclosure that is considered necessary in the local en ironment. or remo es an optional treatment. this will not amount to noncompliance with (#R!s. Thus. for the purpose of this "oncept =aper. Lcon ergence with (#R!sI means adoption of (#R!s with the aforesaid e0ceptions. where necessary. #or a country to be (#R!-compliant. it is not necessary that (#R!s are applied to all entities of different si:es and of different public interests. C en the (*!, recogni:es that (#R!s are suitable for publicly accountable entities. The (*!, has. therefore. recently issued an C0posure @raft of an (#R! for !mall and 7edium-si:ed Cntities 4!7Cs6

PRESENT STATUS OF INDIAN ACCOUNTING STANDARDS

The "ouncil of the (nstitute of "hartered *ccountants of (ndia constituted the *ccounting !tandards ,oard on 21st *pril. 11AA. to formulate *ccounting !tandards applicable to (ndian enterprises. (nitially. the *ccounting !tandards were recommendatory in nature. *fter gaining sufficient e0perience. the "ouncil of the (nstitute gradually started making the *ccounting !tandards mandatory for its members. i.e.. re/uiring the members to report on whether an enterprise subject to audit had followed a mandatory *ccounting !tandard. The legal recognition
2;

to the *ccounting !tandards was accorded for the companies in the "ompanies *ct. 1123. by introduction of section 2114+"6 through the "ompanies 4*mendment6 *ct. 1111. whereby it is re/uired that the companies shall follow the *ccounting !tandards notified by the "entral $o ernment on a recommendation made by the )ational *d isory "ommittee on *ccounting !tandards 4)*"*!6 constituted under section 210* of the said *ct. The pro iso to section 2114+"6 pro ides that until the *ccounting !tandards are notified by the "entral $o ernment the *ccounting !tandards specified by the (nstitute of "hartered *ccountants of (ndia shall be followed by the companies. The $o ernment of (ndia. 7inistry of "ompany *ffairs 4now 7inistry of "orporate *ffairs6. issued )otification dated @ecember A. 2003. prescribing *ccounting !tandards 1 to A and 1 to 21 as recommended by the (nstitute of "hartered *ccountants of (ndia. which ha e come into effect in respect of the accounting periods commencing on or after the aforesaid date with the publication of these *ccounting !tandards in the 'fficial $a:ette. (t may be mentioned that the *ccounting !tandards notified by the $o ernment are irtually identical with the *ccounting !tandards. read with the *ccounting !tandards (nterpretations. issued by the (nstitute of "hartered *ccountants of (ndia. The Reser e ,ank of (ndia 4R,(6. being the regulator of banks in (ndia. re/uires all the banks. through its circularsGguidelines. to follow the *ccounting !tandards issued by the (nstitute of "hartered *ccountants of (ndia. #urther. the !ecurities and C0change ,oard of (ndia 4!C,(6. through the >isting *greement with stock e0changes. re/uires all listed entities to comply with the *ccounting !tandards issued by the (nstitute.*lso. the (nsurance (nitially. *ccounting !tandard 4*!6 ;. 'ontingencies and (vents )ccurring After the !alance Sheet *ate . and *ccounting !tandard 4*!6 2. +et Profit or ,oss for the Period, Prior Periods Items and 'hanges in Accounting Policies, were made mandatory in respect of accounting periods commencing on or after 1.1.118A. #i e more *ccounting !tandards. namely. *! 1. *! A. *! 8. *! 1. and *! 10 were made mandatory from 1st *pril. 1111. Thereafter. *ccounting !tandards were generally made mandatory on the dates indicated in the standards themsel es upon their issuance (nsurance Regulatory and @e elopment *uthority 4(R@*6. which regulates the financial reporting practices of insurance companies under the (nsurance Regulatory and @e elopment *uthority *ct. 1111. through (R@* 4=reparation of #inancial !tatements and *uditorIs Report of the (nsurance "ompanies6 Regulations. 2002. re/uires compliance with the *ccounting !tandards issued by the (nstitute of "hartered *ccountants of (ndia for preparing and presenting their
22

financial statements by insurance companies. =resently. the *ccounting !tandards ,oard 4*!,6 of the ("*( endea ors to formulate (ndian *ccounting !tandards 4*!s6 on the basis of (#R!s as it has been categorically recognised in the Preface to the Statements of Accounting Standards . issued by the ("*(. that MThe ("*(. being a full-fledged member of the (nternational #ederation of *ccountants 4(#*"6. is e0pected. inter alia. to acti ely promote the (nternational *ccounting !tandards ,oardIs 4(*!,6 pronouncements in the country with a iew to facilitate global harmoni:ation of accounting standards. *ccordingly. while formulating the *ccounting !tandards. the *!, will gi e due consideration to (nternational *ccounting !tandards 4(*!s6 issued by the (nternational *ccounting !tandards "ommittee 4predecessor body to (*!,6 or (nternational #inancial Reporting !tandards 4(#R!s6 issued by the (*!,. as the case may be. and try to integrate them. to the e0tent possible. in the light of the conditions and practices pre ailing in (ndia.N *ccordingly. the *ccounting !tandards issued by the ("*( are based on the (#R!s. 8owe er. where departure from (#R! is warranted keeping in iew the (ndian conditions. the (ndian *ccounting !tandards ha e been modified to that e0tent. The major differences between the two are indicated in the *ppendi0 to the *ccounting !tandard itself. in respect of the recently issuedGre ised *ccounting !tandards. #urther. the endea our of the ("*( is not only to bridge the gap between (ndian *ccounting !tandards and (#R!s by issuance of new *ccounting !tandards but also to ensure that the e0isting (ndian *ccounting !tandards are in line with the changes in international thinking on arious accounting issues. (n this regard. the ("*( makes a conscious effort to bring the (ndian *ccounting !tandards at par with the (#R!s. including the (nterpretations issued by (nternational #inancial Reporting (nterpretations "ommittee 4(#R("6. by re ising the e0isting *ccounting !tandards. (ndeed. of late. in respect of certain recently issuedGre ised (ndian *ccounting !tandards. no material difference e0ists between the (ndian *ccounting !tandards and the (#R!s. for e0ample. *ccounting !tandard 4*!6 A. 'onstruction 'ontracts*part from the ("*( ensuring compliance with the (#R!s to the e0tent possible. the )ational "ommittee on *ccounting !tandards 4)*"*!6 constituted by the "entral $o ernment for recommending accounting standards to the $o ernment. while re iewing the *ccounting !tandards issued by the ("*(. considers the de iations in the (ndian *ccounting !tandards. if any. from the (#R!s and recommends to the ("*( to re ise the *ccounting !tandards where er it considers that the de iations are not appropriate.
23

STRATEGY FOR CONVERGENCE WITH IFRS

#ormulation of con ergence strategy to achie e the objecti e specified in re/uires cognisance of reasons for departure of (ndian *ccounting !tandards from the corresponding (#R!s as discussed in the pre ious chapter as well as the comple0ity of the recognition and measurement re/uirements and the e0tent of disclosures re/uired in the (#R!s with a iew to enforce these on arious types of entities. i:.. public interest entities and other than public interest entities 4hereinafter referred to as Lsmall and medium-si:ed entitiesI6. C$'84r(4'/4 ,+7* IFRS) O P15-+/ I'74r4)7 E'7+7+4) 5arious (#R!s were e0amined from the point of iew of their comple0ities in terms of recognition and measurement re/uirements and the e0tent of disclosures re/uired therein to consider their application to arious types of entities. (t is noted that those countries which ha e already adopted (#R!s. i.e.. countries which are fully (#R!-compliant. ha e done so primarily for public interest entities including listed and large-si:ed entities. (t is also noted that the (nternational *ccounting !tandards ,oard also considers that the (#R!s are applicable to public interest entities in iew of the fact that it has recently issued an C0posure @raft of a proposed (#R! for !mall and 7edium-si:ed Cntities+. The ("*(. therefore. is of the iew that (ndia should also become (#R! compliant only for public interest entities. Jith a iew to determine which entities should be considered as public interest entities for the purpose of application of (#R!s. the criteria for >e el ( enterprises as laid down by the (nstitute of "hartered *ccountants of (ndia; and the definition of Lsmall and medium si:ed companyI as per "lause 24f6 of the "ompanies 4*ccounting !tandards6 Rules. 2003. as notified by the 7inistry of "ompany *ffairs 4now 7inistry of "orporate *ffairs6 in the 'fficial $a:ette dated @ecember A. 2003. were considered. The ("*( is of the iew that in iew of the comple0ity of recognition and measurement principles and the e0tent of disclosures re/uired in arious (#R!s. and the fact that about four years ha e elapsed since the ("*( laid down the criteria for >e el ( enterprises. as far as the si:e is concerned. it needs a re ision. *ccordingly. the ("*( is of the iew that a public interest entity should be an entity2A

whose e/uity or debt securities are listed or are in the process of listing on any stock e0change. whether in (ndia or outside (ndiaH or 4ii6 which is a bank 4including a cooperati e bank6. financial institution. a mutual fund. or an insurance entityH or 4iii6 whose turno er 4e0cluding other income6 4C/442) r1944) $'4 *1'2r42 /r$r4 in the immediately preceding accounting yearH or 4i 6 which has public deposits andGor borrowings 3r$% 5&'0) &'2 3+'&'/+&- +')7+717+$') +' 4C/4)) $3 r1944) 7,4'7D 3+84 /r$r4 at any time during the immediately preceding accounting yearH or 4 6 which is a holding or a subsidiary of an entity which is co ered in 4i6 to 4i 6 abo e. (t was considered whether it would be appropriate not to apply full (#R!s to listed entities which do not fulfill the minimum turno er andGor borrowings criteria. which do not fall in these criteria would not be re/uired to follow (#R!s. The ("*( is of the iew that once an entity gets listed on a stock e0change it assumes the character of a public interest entity and. therefore. it would not be appropriate to e0empt such entities from the application of (#R!s. !imilarly. a bank. a financial institution. a mutual fund. an insurance entity and holding or subsidiary of a public interest entity also assumes the character of a public interest entity. A//$1'7+'( S7&'2&r2) 3$r S%&-- &'2 M42+1%-)+E42 E'7+7+4) 'nce the (#R!s are applied to entities identified. an issue arises as to which *ccounting !tandards should be applicable to entities which are not co ered by 4i.e.. L!mall and 7ediumsi:ed CntitiesI 4!7Cs6. The following three alternati es were considered4i6 The (#R!s should be modified to pro ide e0emptionsGrela0ations as has been done in the e0isting *ccounting !tandards issued by the ("*(Gnotified by the $o ernment of (ndiaH 4ii6 The e0isting *ccounting !tandards with e0emptionsGrela0ations as at present. should continue to applyH 4iii6 *pply the (#R! for !7Cs 4the C0posure @raft of which has been issued recently6 with or without modifications to suit (ndian conditions. The ("*( is of the iew that since the (*!, itself recogni:es that the (#R!s are too onerous for small and medium-si:ed entities. it would not be appropriate to apply the (#R!s with e0emptionsGrela0ations to !7Cs. The ("*( is also of the iew that to continue to apply the
28

e0isting *ccounting !tandards in (ndia to !7Cs with the e0isting e0emptionsGrela0ations would not be appropriate as it would mean that the ("*(Gthe $o ernment would ha e to keep on modifying the e0isting *ccounting !tandards as soon as a change is made in the corresponding (#R!s after considering the appropriateness thereof in the conte0t of (ndian !7C conditions. The ("*( is. therefore. of the iew that it may be appropriate to ha e a separate standard for !7Cs. (t was noted that the proposed (#R! for !7Cs was still at the C0posure @raft stage and it may undergo changes when finally issued. *ccordingly. whether the (#R! for !7Cs should be adopted in to or with modifications. should be e0amined when the said (#R! is finally issued. The ("*( is of the iew that a separate standard for !7Cs would be more useful from the following perspecti es also4i6 The small and medium-si:ed entities would not ha e to consider all the (#R!s which are too oluminousH and 4ii6 it would ensure con ergence. to the e0tent possible. with the proposed (#R! for !mall and 7edium-si:ed Cntities being issued by (*!,. e en for this class of entities. (n this conte0t. it is noted that in order to be an (#R!-compliant country. it is not necessary to adopt the (#R! for !mall and 7edium-si:ed Cntities to be issued by (*!,. Jhether the (#R!s should be adopted for =ublic (nterest Cntities stage-wise or all at once from a specified future date The ("*( e0amined the (#R!s and the e0isting *ccounting !tandards with a iew to determine the e0tent to which they differ from the (#R!s and the reasons therefore to identify which (#R!s can be adopted in near future. which (#R!s can be adopted after resol ing conceptual differences with the (*!,. which (#R!s can be adopted after the industry and the profession is ready in terms of the technical skills re/uired. and which (#R!s can be adopted after the rele ant laws and regulations are amended. 'n the basis of this e0amination. the ("*( has classified arious (#R!s into the following fi e categoriesC&74($rD I - IFRS) ,*+/* 2$ '$7 +'8$-84 &'D -4(&- $r r4(1-&7$rD +))14) '$r *&84 &'D +))14) ,+7* r4(&r2 7$ 7*4+r )1+7&5+-+7D +' 7*4 4C+)7+'( 4/$'$%+/ 4'8+r$'%4'7: 9r49&r42'4)) $3 +'21)7rD &'2 &'D /$'/4971&- 2+334r4'/4) 3r$% 7*4 I'2+&' A//$1'7+'( S7&'2&r2). This category has further been classified into two parts as follows-

21

C&74($rD I A - IFRS) ,*+/* /&' 54 &2$9742 +%%42+&74-D &) 7*4)4 2$ '$7 *&84 &'D 2+334r4'/4) ,+7* 7*4 /$rr4)9$'2+'( I'2+&' A//$1'7+'( S7&'2&r2). The following (#R!s ha e been identified in this category (*! 11. "onstruction "ontracts (*! 2+. ,orrowing "osts C&74($rD I B - IFRS) ,*+/* /&' 54 &2$9742 +' '4&r 3171r4 &) 7*4r4 &r4 /4r7&+' %+'$r 2+334r4'/4) ,+7* 7*4 /$rr4)9$'2+'( I'2+&' A//$1'7+'( S7&'2&r2). The following (#R!s ha e been identified in this category (*! 2 (n entories (*! A."ash #low !tatements (*! 20. *ccounting for $o ernment $rants and @isclosure of $o ernment *ssistance (*! ++. Carnings =er !hare (*! +3. (mpairment of *ssets (*! +8. (ntangible *ssets C&74($rD II - IFRS) ,*+/* %&D r4F1+r4 )$%4 7+%4 7$ r4&/* & -484- $3 74/*'+/&9r49&r42'4)) 5D 7*4 +'21)7rD &'2 9r$34))+$'&-) 0449+'( +' 8+4, 7*4 4C+)7+'( 4/$'$%+/ 4'8+r$'%4'7 &'2 $7*4r 3&/7$r). This category also includes those (#R!s corresponding to which (ndian *ccounting !tandards are under preparationGre ision. The following (#R!s ha e been identified in this category (*! 18. Re enue (*! 21.The Cffects of "hanges in #oreign C0change Rates (*! 23. *ccounting and Reporting by Retirement ,enefit =lans (*! ;0. (n estment =roperty 4"orresponding (ndian *ccounting !tandard is under preparation6 (#R! 2. !hare-based =ayment 4"orresponding (ndian *ccounting !tandard is under preparation6 (#R! 2. )on-current *ssets 8eld for !ale and @iscontinued 'perations 4"orresponding (ndian *ccounting !tandard is under preparation6
+0

C&74($rD III - IFRS) ,*+/* *&84 /$'/4971&- 2+334r4'/4) ,+7* 7*4 /$rr4)9$'2+'( I'2+&' A//$1'7+'( S7&'2&r2). This category has further been di ided into two parts as followsC&74($rD III A - IFRS) *&8+'( /$'/4971&- 2+334r4'/4) ,+7* 7*4 /$rr4)9$'2+'( I'2+&' A//$1'7+'( S7&'2&r2) 7*&7 )*$1-2 54 7&04' 19 ,+7* 7*4 IASB. The following (#R!s ha e been identified in this "ategory (*! 1A.>eases (*! 11. Cmployee ,enefits (*! 2A."onsolidated and !eparate #inancial !tatements (*! 28. (n estments in *ssociates (*! +1. (nterests in %oint 5entures (*! +A. =ro isions. "ontingent >iabilities and "ontingent *ssets C&74($rD III B - IFRS) *&8+'( /$'/4971&- 2+334r4'/4) ,+7* 7*4 /$rr4)9$'2+'( I'2+&' A//$1'7+'( S7&'2&r2) 7*&7 '442 7$ 54 4C&%+'42 7$ 2474r%+'4 ,*47*4r 7*4)4 )*$1-2 54 7&04' 19 ,+7* 7*4 IASB $r )*$1-2 54 r4%$842 5D 7*4 ICAI +7)4-3. The following (#R!s ha e been identified in this "ategory (*! 12. (ncome Ta0es (*! 2;. Related =arty @isclosures (*! ;1. *griculture 4"orresponding (ndian *ccounting !tandard is under preparation6 (#R! +. ,usiness "ombinations (#R! 3. C0ploration for and C aluation of 7ineral Resources (#R! 8. 'perating !egments

+1

C&74($rD IV - IFRS): 7*4 &2$97+$' $3 ,*+/* ,$1-2 r4F1+r4 /*&'(4) +' -&,)Gr4(1-&7+$') 54/&1)4 /$%9-+&'/4 ,+7* )1/* IFRS) +) '$7 9$))+5-4 1'7+- 7*4 r4(1-&7+$')G-&,) &r4 &%4'242. The following (#R!s ha e been identified in this "ategory (*! 1. =resentation of #inancial !tatements (*! 8. *ccounting =olicies. "hanges in *ccounting Cstimates and Crrors (*! 10. C ents *fter the ,alance !heet @ate (*! 13. =roperty. =lant and C/uipment (*! +2. #inancial (nstruments- =resentation 4C0posure @raft of the "orresponding (ndian *ccounting !tandard has been issued6 (*! +;. (nterim #inancial Reporting (*! +1. #inancial (nstruments- Recognition and 7easurement 4C0posure @raft of the "orresponding (ndian *ccounting !tandard has been issued6 (#R! 1. #irst-time *doption of (nternational #inancial Reporting !tandards (#R! ;. (nsurance "ontracts (#R! A. #inancial (nstruments- @isclosures C&74($rD V - IFRS) /$rr4)9$'2+'( 7$ ,*+/* '$ I'2+&' A//$1'7+'( S7&'2&r2 +) r4F1+r42 3$r 7*4 7+%4 54+'(. 8owe er. the rele ant (#R!s. when adopted upon full con ergence. can be used as the MfallbackN option where needed. (*! 21. #inancial Reporting in 8yper-inflationary Cconomies Convergence with IFRS Stage-wise Approach The ("*( e0amined whether con ergence with (#R!s can be achie ed stagewise as below S7&(4 I- "on ergence with (#R!s falling in "ategory ( immediately S7&(4 II- "on ergence with (#R!s classified in "ategory (( and "ategory ((( after a certain period of time. say. 2 years after arious stakeholders ha e achie ed the le el of technical preparedness and after conceptual differences are resol ed with the (*!,. S7&(4 III- "on ergence with (#R!s classified in "ategory (5 only after necessary amendments are made in the rele ant laws and regulations.
+2

 S7&(4 IV- "on ergence with (#R!s classified in "ategory 5 by way of adoption on full con ergence. The ("*( considered in-depth the stage-wise adoption approach and its iews thereon are as below (f some (#R!s are adopted in the initial stages and the other (#R!s are adopted later. this may result in mis-match between the re/uirements of the adopted (#R!s in the first stage and the accounting standards issued by ("*(Gnotified. corresponding to those (#R!s which are not adopted. This is because many accounting standards are inter-related. *nother problem can be that (#R!s adopted in one stage may not be possible to be implemented fully until the adoption of the (#R!s to be adopted at the later stage in iew of their inter-relationship. C en. at present. it is found that when one (#R! is adopted. it results in a number of changes in the corresponding (ndian *ccounting !tandards. #or e0ample. the issuance of C@ of *! +0. Financial Instruments" Recognition and .easurement&. corresponding to (*! +1. Financial Instruments" Recognition / .easurement&, has resulted in proposed limited re isions to many other accounting standards such as *! 2. *! 11. *! 1+. *! 21. *! 2+. *! 2A. *! 28 and *! 21. !uch an approach is fraught with the danger of missing out certain minute aspects in other standards which may also re/uire re ision. #urther changes in (#R!s will also make the process more comple0 as with e ery re ision in (#R!. re isions may be re/uired in the e0isting *ccounting !tandards apart from the changes in the adopted (#R!s. Though (*!, has decided not to issue any re ised (#R! or new (#R! effecti e till %anuary 1. 2001. but after that date this problem will become acute. Convergence with IFRS All-at-once Approach (n iew of the abo e difficulties. the ("*( is of the iew that it would be more appropriate to adopt all (#R!s from a specified future date as has been done in many other countries. *fter considering the current economic en ironment. e0pected time to reach the satisfactory le el of technical preparedness and the e0pected time to resol e the conceptual differences with the (*!,. 7*4 ICAI *&) 24/+242 7*&7 IFRS) )*$1-2 54 &2$9742 3$r 915-+/ +'74r4)7 4'7+7+4) 3r$% 7*4 &//$1'7+'( 94r+$2) /$%%4'/+'( $' $r &374r #)7 A9r+-: !0##. This will gi e enough time to
++

all the participants in the financial reporting process to help in building the en ironment supporting the adoption of (#R!s. (nsofar as the legal and regulatory aspects are concerned. the ("*( is of the iew that. on adoption of those (#R!s. ha ing certain re/uirements in conflict with the lawsGregulations. the latter will pre ail. The ("*( is further of the iew that this approach is appropriate because to wait for full con ergence until the rele ant lawsGregulations are amended would not be practicable as such amendments may not take place for many years. The ("*( also e0amined whether an entity should ha e a choice to become fully (#R! compliant before 1st *pril. 2011. The ("*( is of the iew that an early adoption of (#R!s should be encouraged. 8owe er. such an adoption should be for all (#R!s and that it cannot be on selecti e basis. F$r%&7 $3 /$'84r(42 A//$1'7+'( S7&'2&r2) The ("*( considered whether the e0isting *ccounting !tandards should be re ised to make them fully compliant with (#R!s by the specified date or on the specified date the (#R!s themsel es should be adopted. (n either case. (ndian-specific regulatoryGlegal aspects may be included in a separate section. where appropriate. The ("*( is of the iew that it would be more cumbersome to follow the first approach. i.e.. re ising the *ccounting !tandards. Therefore. the second approach should be. i.e.. (#R!s. including the (#R! numbers. should be adopted from the specified date of 1st *pril. 2011. The (#R!s should be issued as (ndian *!s. which would be considered (#R!-e/ui alent. (n order to facilitate reference to the e0isting (ndian *ccounting !tandards. along with the (#R! number. in the brackets. the e0isting *ccounting !tandard number may also be gi en. R$-4 $3 8&r+$1) )7&04*$-24r) 7$ 4')1r4 /$'84r(4'/4 ,+7* IFRS) 3r$% 7*4 )94/+3+42 2&74: +.4.: &//$1'7+'( 94r+$2) /$%%4'/+'( $' $r &374r #)7 A9r+-: !0## The following sections deal with the role of arious stakeholders in the standard setting process to ensure smooth transition to the (#R!s from 1st *pril. 2011. in respect of the listed and other public interest entities.

R$-4 $3 7*4 ASB $3 7*4 ICAI

+;

The ("*( considered whether it should altogether stop formulating *ccounting !tandards hereinafter in iew of the fact that from 1st *pril. 2011. the (#R!s e0isting on that date would come into force for public interest entities. #or !7Cs. (#R! for !7Cs may similarly become applicable. (n this conte0t. it is noted that. at present. the ("*( is in the process of formulating certain new accounting standards corresponding to the (#R!s such as *ccounting !tandard 4*!6 +0. Financial Instruments" Recognition and .easurement&, and *ccounting !tandard 4*!6 +1. Financial Instruments" Presentation&, and that C0posure @rafts in respect thereof ha e already been issued. (t was also noted that certain e0isting *ccounting !tandards such as *ccounting !tandard 4*!6 10. Accounting for Fi0ed Assets&, is being re ised and has reached ad anced stage of issuance. The ("*( feels that to stop work on such *ccounting !tandards would depri e the country of con erging with (#R!s before the specified date of 1st *pril. 2011. The ("*( is. therefore. of the iew that it should continue to issue *ccounting !tandards in conformity with the corresponding (#R!s which ha e. at present. reached ad anced stage of formulation e en if they fall within "ategory (5. This would also make the transition to (#R!s from 1st *pril. 2011 smoother. The *!, may consider re ising *ccounting !tandards corresponding to (#R!s indicated in "ategory (, and "ategory (( on priority basis. #or this purpose. *!, may consider issuing a composite e0posure draft of modifications in the *ccounting !tandards corresponding to the (#R!s listed in "ategory (, and issue e0posure drafts of *ccounting !tandards corresponding to (#R!s falling in "ategory (( so that by the time the con ergence date arri es. in respect of these standards the country is already in con ergence with (#R!s. Jhile this is a broad suggestion. the *!, may consider in-depth its work plan as to which of these accounting standards are capable of being re isedGissued keeping in iew arious factors such as e0tent of changes re/uired. *nother ad antage of this process could be that certain (nternational stock e0changes. say. >ondon !tock C0change. may decide to allow listing on their stock e0changes without re/uiring preparation of reconciliation statement e en prior to 1st *pril. 2011. #or instance. the >ondon !tock C0change may allow (ndian companies to get listed without reconciliation statement from 1st *pril. 2001 in case the con ergence in respect of "ategories (, and (( and the new accounting standards which are in the process of formulation are issued by that time.

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The *!, of ("*( should take up the conceptual differences with the (*!, in respect of (#R!s falling in "ategory ((( and it should resol e these differences as soon as possible by either con incing the (*!, to modify (#R!s or to satisfy itself that the re/uirements in the concerned (#R!s are appropriate e en in the (ndian conditions. (n respect of (#R!s falling in "ategory (5. i.e.. (#R!s the adoption of which would re/uire changes in lawsGregulations. the ("*( should initiate a dialogue with the rele ant departments of the $o ernment or the authorities set up by the $o ernment such as the )ational *d isory "ommittee on *ccounting !tandards which formulate laws and with the rele ant regulatory authorities to con ince them that either the legal pro isionsGregulations related to recognition. measurement and disclosure re/uirements in the financial statements should be withdrawn by 1st *pril. 2011. or the same should be appropriately amended to ensure con ergence with (#R!s. The (*!, has declared a stable platform for (#R!s up to %anuary 1. 2001. i.e.. the (*!, will not make any (#R! effecti e before that date. which is issued prior to that date. Thus. after 1st %anuary. 2001. the (*!, may issue new (#R!s or re ise the e0isting ones on fre/uent basis. The *!, of the ("*( should play a more effecti e role by sending comments on the discussion papersGC0posure @rafts of the proposed (#R!s. The *!, should also participate in the Roundtables organi:ed by the (*!, on arious drafts of proposed new (#R!sGre ised (#R!s. (n other words. the *!, should play a greater role in influencing the future (#R!s. The *!, should also play a similar role in respect of the drafts of the (nterpretations issued by the (nternational #inancial Reporting "ommittee 4(#R("6. (n this conte0t. the section related to the LRole of *!, of ("*( in =ost-con ergence !cenarioI may also be referred to. The *!, can also play a greater role in influencing future (#R!s in the following ways ,y identifying e0perts on (#R!s in (ndia. who can be appointed on the (*!, through the selection process followed by the (*!, so that the (ndian concerns are e0pressed at the ,oard le el. ,y nominating *!, staff on the (*!, projects. on secondment basis or otherwise. The ("*( notes that (*!, welcomes such participation as is e ident from the fact that the staff of certain national standard-setters is presently in ol ed in arious (*!, projects.

+3

*lso. (*!,Is Statement of !est Practices" #or$ing Relationships between the IAS! and other Standard%Setters encourages the national standard setters to do so .

R$-4 $3 ICAI &) &' 421/&7$rG7r&+'4r Jith a iew to prepare its e0isting and prospecti e members for the impending adoption of the (#R!s from 1st *pril. 2011. the ("*( should formulate strategies with regard to the following To re ise the syllabi of the pre-/ualification "hartered *ccountancy "ourse to include (#R!s as a part of its curriculumH The "ontinuing =rofessional Cducation 4"=C6 "ommittee and the "ommittee for 7embers in (ndustry should hold intensi e workshops on (#R!s to train the members in practice as well as in industry. (n order to encourage members to participate in the (#R!specific workshops. the ("*( may consider laying down minimum "=C hours re/uirements in this regard. e.g.. the ("*( may make it mandatory for its members to attend a minimum number. say. 20 "=C hours of workshops on (#R!s e ery year till 1st *pril. 2011 including those members who are in industryH =reparation of educational material to guide its members on arious intricacies in ol ed in the implementation of (#R!s. The educational material may focus on those areas which are new compared to the e0isting *ccounting !tandards. R$-4 $3 7*4 G$84r'%4'7 &'2 R4(1-&7$r) The ("*( considers that the $o ernment and the Regulators should play the following role in making the country (#R!-compliant The $o ernment and the Regulators should establish legal and regulatory en ironments that pro ide for compliance with all the (#R!s. The $o ernment should frameG re ise laws in consultation with )*"*! to reflect the (#R!s. !imilarly. arious Regulators should frameGre ise regulations in consultation with ("*(. This should be considered as a high priority.

Role of Reporting Entities

+A

The reporting entities to which (#R!s are recommended to be applied should prepare themsel es in the following ways *ll the affected entities should design and implement an (#R! transition programme and allocate the necessary resources. This includes obtaining the commitment from the top down. i.e.. from those charged with go ernance to those responsible for financial reporting by indi idual business units. *lso. they should consider the interdependencies between the transition to (#R!s and other financial reporting projects. if any. such as compliance with laws and regulations. The entities should prepare to implement (#R!s by identifying differences and addressing re/uired financial reporting system changes. The entities should design and implement plans to change management reporting system used to monitor the performance of the business from the pre iously applied *ccounting !tandards to (#R!s. The entities should also pro ide (#R! training to staff at all le els affected by the transition to (#R!s. The entities should acti ely contribute to the international standard-setting process. in particular. to identify practical implementation issues. The entities should consider at an early stage changes proposed by the C0posure @rafts of (#R!s with a iew to gauge the potential impact thereof on their financial statements so that they are able to pro ide informed comments on the drafts to the (*!,G("*(. R$-4 $3 I'21)7rD A))$/+&7+$') (ndustry associations such as #ederation of (ndian "hambers of "ommerce and (ndustry 4#(""(6. *ssociated "hambers of "ommerce 4*ssocham6 and "onfederation of (ndian (ndustries 4"((6 can also play an important role in preparing their constituents for the adoption of the (#R!s in the following ways 8olding round-tables on the C0posure @rafts of the (#R!s so that the iews of the *ssociation can be sent to the (*!,G("*(. "onducting seminarsGworkshops on (#R!s for the industry participants to pro ide them appropriate training.
+8

 =ro ide industry-specific forums to their constituents to discuss the industry specific issues in implementation of (#R!s. R$-4 $3 ASB +' 7*4 9$)7-/$'84r(4'/4 )/4'&r+$ Jith regard to the role of *!, of the ("*( in the post-con ergence scenario. the ("*( decided to generally endorse the role of the national standard-setters as en isaged in the Statement of !est Practices" #or$ing Relationships between the IAS! and other Accounting Standard%setters, issued by the (*!,. as followsR$-4 +' 3$r%1-&7+$' $3 IFRS- 4F1+8&-4'7 I'2+&' A//$1'7+'( S7&'2&r2) 1. *!, should undertake one or more of the following processes in adopting (#R!s determine whether each (#R! meets specified criteria set out in local legislationGregulationsH endorse the (#R! in the form of (#R!-e/ui alent (ndian *ccounting !tandards for the local regulatory framework. with changes. if necessary. as mentioned at 2 and + belowH present the standards for appro al of )*"*! for the purpose of $o ernment notification Therefore. adopting (#R!s would be an ongoing process. 2. (n general. working with the $o ernment and regulators for adoptionG implementation of (#R!s. including deciding in rare circumstances whether any car ing out of the (#R! re/uirements in the e0isting local conditions is warranted in the public interest . +. (n some cases. as at present. the *!, may continue the policy of remo ing optional treatments and adding disclosure re/uirements to (#R!s when it belie es that doing so pro ides more comparable and useful information in the country. Jhen *!, makes any change to an (#R!. for e0ample. adding a disclosure that is considered necessary in the local en ironment. or remo ing an optional treatment. this should be made clear so that users of the (#R! are aware of the changes. (n some cases. certain changes in terminology in (#R! may be re/uired keeping in iew legal re/uirements. e.g.. replacing the term Ltrue K fairI for Lpresent fairlyI. in (*! 1. Presentation of Financial Statements&. !uch changes do not lead to non-con ergence with (#R!.
+1

;. (ne itably. /uestions of interpretation will arise when (#R!s are applied. *ccordingly. *!, should be familiar with the implementation of (#R!s in the country. This familiari:ation process may in ol e. or depend upon. close liaison with local capital market and industry regulators. (f *!, belie es that an issue re/uires interpretation of (#R!s. it should re/uest the (#R(" to address the issue. (f (#R(" includes the matter for interpretation on its *genda. interpretationGguidance on the matter should not be issued. (f (#R(" does not include the matter on its *genda. it issues reasons therefore including what a particular re/uirement of an (#R! means. This itself can pro ide guidance to arious stakeholders. The (#R(" or (*!, staff may decide that an amendment to an (#R! is the more appropriate course to follow. *s part of this process. other accounting standard setters that face a common issue could work together to formulate a possible approach to the issue for resolution by the (#R(" or the (*!,. (#R!s are intended to apply worldwide regardless of local legislati e and regulatory en ironments. 8owe er. some issues may relate to particular legislati e or other local re/uirements. (n these cases. *!, may decide to issue guidance. "are needs to be e0ercised. howe er. to ensure that the issues are not more widely rele ant. (n considering such issues. *!, should liaise with the (#R(". and if it belie es it is necessary to issue any guidance. it should a oid incompatibility with (#R!s.

R$-4 $3 ASB +' +'3-14'/+'( IFRS) 543$r4 7*4+r 3+'&-+E&7+$' 1. *!, should ha e a role in communicating (*!, acti ities and outputs to the industry and other stakeholders through educational and promotional acti ities. including publishing or distributing (*!, consultati e documents in the jurisdictions. and in both pro iding the (*!, with feedback on these acti ities and outputs themsel es and encouraging them to pro ide feedback to the (*!,. 2. *!, should encourage arious stakeholders to comment on (*!, consultati e documents direct to the (*!, as well as to the *!,. +. #orums of communicating iews other than comment letters are increasingly important in gathering iews. including forums on specific issues. *!, should use these forums as a
;0

mechanism for encouraging the stakeholders to participate in the (*!,Is standard-setting process. ;. *!, can assist the (*!, in identifying constituents who can be in ol ed in round-table discussions and other forums and the issues of particular rele ance to the stakeholders. 2. Jithout limiting the direct communication of ideas to the (*!,. *!, has a role in communicating the iews and ideas of the stakeholders to the (*!, through the consultation processPpro iding a forum for iews. 'ther organi:ations. such as representati e bodies with an interest in financial reporting. may also contribute to this process. *!, should make its own submissions to the (*!, on consultati e documents and should con ey its iews to the (*!, rather than pro ide merely a synthesis of the iews e0pressed by the stakeholders. 3. *!, should make the (*!, aware of any major conceptual differences of opinion it may ha e with a project as early as possible in the life of a project. This would re/uire *!, to monitor closely the de elopment of the project. A. The (*!,Is work programme is a subject on which it would be particularly helpful for *!, to channel its iews and those of the stakeholders in a constructi e manner. !ince the (*!, is unable to respond to e ery interested partyIs re/uest to deal with a topic. *!, should seek the iews of the stakeholders on work programme priorities and collect and summari:e them for consideration by the (*!,. 8. @irect in ol ement of *!, in the (*!,Is projects would help to ensure that a wide range of iews and ideas are considered in the early stages of the de elopment of a project. The (*!, may pro ide opportunities to *!, to be directly in ol ed with (*!, projects in the following ways (n ol ement in a Lresearch projectI alone. or. in partnership with a team of other standard-setters 4either as a leader of the team or as team member6. under the guidance of (*!, staff and selected ,oard ad isers.

;1

 (n ol ement of the *!, staff in a Lproject teamI on an acti e (*!, project under the direction of the (*!, directors. 1. *!, may conduct research or de elop thinking on a topic that has not been identified by the (*!, as a current priority. and then present the results of that work for consideration by the (*!, andGor other national accounting standard setters. #or there to be an e0pectation that those materials would be considered there would need to be some ad ance agreement both that the topic is worthy of consideration and that the (*!, andGor other standard-setters ha e a common interest in the topic. 10. The (*!, would welcome offers of staff assistance from the *!,. To be effecti e. from both the (*!,Is perspecti e and that of the *!,. this in ol ement needs to be undertaken with a clear understanding of the staff memberIs role and responsibilities. 11. The (*!, establishes working groups for some projects. and in ites constituents to nominate candidates for membership of these groups. The working groups are a source of e0pert ad ice and ideas for the staff in progressing a particular project. *!, may be able to assist in the process of making nominations to. and in facilitating the operations of. working groups by identifying and encouraging suitable indi iduals to nominate themsel es and. if appointed. to liaise acti ely with those indi iduals and assist them when needed. 12. The iews of *!, can be a aluable source of independent thought in the de elopment of (*!, documents. *!, should pro ide comments to the (*!, on consultati e documents such as C0posure @rafts and @iscussion =apers. (f time does not permit *!,-le el input. comment from staff of the *!, can be pro ided. (f *!, is unable to comment on each consultati e document it should focus on those projects that are of particular importance to the country. or those on which the *!, belie es it can best contribute. (t may also be helpful for *!, to comment on other (*!, documents. such as issues papers and draft @iscussion =apers when it belie es that the (*!, would benefit from their input at an early stage. EC94/7&7+$') 3r$% 7*4 IASB

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To ensure smooth con ergence with (#R!s. upto 2011 and thereafter also. (*!, is also e0pected to play an important role as follows =ro ide guidance on issues emerging on adoption of (#R!s on timely basis at least upto 2011. *ddress concerns about the comple0ity and structure of the international standards. Jrite standards in simple Cnglish that is understandable. clear and capable of translation and consistent application. (n de eloping the (#R! and setting effecti e dates. be cogni:ant of the fact that the final standards are re/uired to be translated in (ndia for the purpose of $o ernment )otification. (n considering changes to the (#R!. be cogni:ant of the cost s. the benefits of the proposed changes. Cstablish a process. or enhance the e0isting process to respond in a timely manner to re/uests for interpretations. "onsider the de elopment of implementation guidance.

;+

DIFFERENCES BETWEEN INDIAN GAAP AND IFRS

Pr4)4'7&7+$' $3 F+'&'/+&- S7&74%4'7)
=articulars

!tandard ,alance !heet

S7&'2&r2) 3$--$,42 1'24r I'2+&' GAAP *! 1 D @isclosure of *ccounting =olicies Re/uired. The balance sheet is neither classified into current and non-current nor is it in order of li/uidity.

O' 7r&')+7+$' 7$ IFRS (*! 1 D =resentation of #inancial !tatements Re/uired. *n entity is re/uired to present current and non-current assets. and current and noncurrent liabilities. as separate classifications in the statement of financial position. Re/uired Re/uired

(ncome !tatement Re/uired !tatement of )ot re/uired "omprehensi e (ncome !tatement of )o separate statement of changes in * separate statement of changes changes in e/uity shareholderIs e/uity is re/uired. in shareholderIs e/uity is re/uired. "ash flow statement Re/uired Re/uired *ccounting =olicies Re/uired Re/uired )otes to financial Re/uired Re/uired statements =reparation and #inancial statements are presented #inancial statements are presented =resentation on a single-entity parent company on a consolidated basis. 'n a 4standalone6 basis. (t is not oluntary basis. an entity may mandatory to prepare consolidated present single-entity parent financial statements but must use company 4standalone6 financial the consolidation standard if statements along with its prepared. consolidated financial statements. Cstimation ?ncertainty The nature of the uncertainty and the carrying amounts of such assets and liabilities at the end of the reporting period are re/uired to be disclosed. !tatement @isclosed as a separate item after #ringe ,enefit ta0 is included as a profit before ta0 on the face of part of related e0pense which income statement. gi es rise to incurrence of ta0. @efined as e ents or transactions clearly distinct from the ordinary acti ities of the entity and are not e0pected to recur fre/uently and regularly. =rohibited. *ll items of income and e0pense are considered to deri e from an entityIs ordinary acti ities.
;;

)ot re/uired.

(ncome #ormat

C0traordinary items

I'84'7$r+4) S7&'2&r2) 3$--$,42 1'24r I'2+&' GAAP !tandard *! 2 D 5aluation of (n entories "ost #ormulae !tated at cost on weighted a erage basis. "onsistency of cost )ot specified formulae for similar in entories
=articulars

O' 7r&')+7+$' 7$ IFRS (*! 2 D (n entories )o change re/uired. !ame cost formulae is used for all in entories that ha e similar nature and use to the entity

C&)* F-$, S7&74%4'7)

=articulars

S7&'2&r2) 3$--$,42 1'24r O' 7r&')+7+$' 7$ IFRS I'2+&' GAAP

;2

!tandard "ash and "ash e/ui alents

*! + D "ash #low !tatements (*! A D !tatement of "ash #lows )o pro ision in *! + for "ash may include bank classification of bank o erdrafts repayable on o erdrafts. demand but not short-term bank borrowingsH these are considered to be financing cash flows. (ndirect method. !eparately disclosed. (nterest paid should be disclosed as financing cash flow and interest recei ed should be disclosed as in esting cash flow. )o change re/uired. =rohibited. (nterest paid should be disclosed as operating or financing. (nterest recei ed is disclosed as either operating or in esting cash flow.

#ormat and content of cash flow statement "ash flows associated with e0traordinary items @isclosure of interest paid and recei ed

@isclosure of di idend paid @isclosure of di idend recei ed @isclosure of ta0es paid @isclosure of cash payments

#inancing. (n esting. 'perating. )o such re/uirement.

'perating or financing. 'perating or in esting. !imilar. *dditional disclosure of cash payments by a lessee relating to finance lease under financing acti ities. additional disclosures in "#! and for ac/uisition of subsidiaries.

E84'7) &374r 7*4 R49$r7+'( P4r+$2 P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! ; D "ontingencies and C ents (*! 10 - C ents *fter the 'ccurring after the ,alance !heet Reporting =eriod
;3

@ate A//$1'7+'( P$-+/+4): C*&'(4) +' A//$1'7+'( E)7+%&74) &'2 Err$r P&r7+/1-&r) S7&'2&r2) 3$--$,42 1'24r I'2+&' GAAP !tandard *! 2 - )et =rofit or >oss for the =eriod. =rior =eriod (tems and "hanges in *ccounting =olicies @efinition of prior *! 2 co ers only items of income period items and e0penses under the definition of prior period items. *! 2 do not include balance sheet misclassification. which do not ha e an income statement impact. =rior period items Reported as a prior period adjustment in current year results. "omparati es are not restated. O' 7r&')+7+$' 7$ IFRS (*! 8 - *ccounting =olicies. "hanges in *ccounting Cstimates and Crrors (*! 8 co ers all the items in financial statements.

Crrors

*n entity shall correct material prior period errors retrospecti ely in the first set of financial statements authori:ed for issue by restating the comparati e amounts for the prior period4s6 presented in which the error occurred. =rior period errors are included in 7aterial prior period errors are determination of profit or loss of corrected retrospecti ely by the period in which the error is restating the comparati e amounts disco ered. for prior periods presented in which the error occurred or if the error occurred before the earliest period presented. by restating the opening statement of financial position.

Pr$94r7D: P-&'7 &'2 EF1+9%4'7 P&r7+/1-&r) !tandard 7ethod depreciation S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 3 D @epreciation *ccounting (*! 13 - =roperty. =lant and C/uipment of !traight- >ine basis 7ethod. !imilar but other methods such as diminishing balance method and the units of production method are also a ailable.
;A

"hange in method of Re/uires retrospecti e redepreciation computation of depreciation and any e0cess or deficit on such recomputation be re/uired to be adjusted in the period in which such change is effected. 4B6Reassessment of )ot currently re/uired. useful life and depreciation method R484'14 R4/$('+7+$' P&r7+/1-&r) !tandard

"hanges in useful life is considered as change in accounting estimate and applied prospecti ely. Re/uires annual reassessment of useful life.

S7&'2&r2) 3$--$,42 1'24r O' 7r&')+7+$' 7$ IFRS I'2+&' GAAP *! 1 D Re enue Recognition (*! 18 - Re enue (#R(" 1+ - "ustomer >oyalty =rogrammes

Re enue @efinition

Re enue is the gross inflow of cash. recei ables or other consideration arising in the course of the ordinary acti ities from the scheduled ser ices 4such as passenger. e0cess baggage. mail. and cargo6. and from the use by others of enterprise resources yielding handling and ser icing re enue. manufacturers credit and incidental re enue.

7easurement re enue

(nterest

of =assenger re enue is recogni:ed on flown basis. Jhile "argo re enue is recogni:ed on uplift basis after making the necessary adjustments for estimated cargo carriage beyond the year-end. The =ool Re enue is accounted on accrual basis as per the arrangement with the airlines concerned. (nterest is recogni:ed on a time (nterest income is recogni:ed proportion basis taking into account using the effecti e interest the amount outstanding and the rate method. 4(*! 186 applicable.

Re enue is the gross inflow of economic benefits during the period arising in the course of the ordinary acti ities of an entity when those inflows result in increases in e/uity. other than increases relating to contributions from e/uity participants. *mounts collected on behalf of third parties such as sales and ser ice ta0es and alue-added ta0es are e0cluded from re enues. 4(*! 186 #air alue of re enue from sale of goods and ser ices when the inflow of cash and cash e/ui alents is deferred is determined by discounting all future receipts using an imputed rate of interest. 4(*! 186

;8

4B6"ustomer >oyalty )o specific guidance. The company =rogrammes operates joint M#re/uent #lyer =rogrammeN for which the estimated food cost and legal liability if any for free tra el under this programme is pro ided for and charged to =rofit and >oss *ccount.

*ward credits granted to customers as part of a sales transaction are accounted for as a separately identifiable component of the sales transaction4s6. with the consideration recei ed or recei able allocated between the award credits and the other components of the sale.

F+C42 A))47) P&r7+/1-&r) S7&'2&r2) 3$--$,42 1'24r I'2+&' GAAP !tandard *! 10 - *ccounting for #i0ed *ssets "omponent *! 10 does not re/uire full accounting adoption of the component approach. *ircraft are stated at purchase price. 'ther assets including aircraft rotables are capitali:ed and stated at historical cost. !aleGscrap of #i0ed $ain or loss arising out of *ssets saleGscrap of #i0ed *ssets including aircraft o er the net depreciated alue is taken to =rofit K >oss account as )on-'perating Re enue or C0penses. O' 7r&')+7+$' 7$ IFRS (*! 13 - =roperty. =lant and C/uipment (*! 13 mandates component accounting. ?nder component accounting approach. each major part of an item of e/uipment with a cost that is significant in relation to the total cost of the item is depreciated separately. )on-current assets classified as held for sales are measured at the lower of its carrying alue and fair alue less costs to sell. )oncurrent assets to be disposed of are classified as held for sale when the asset is a ailable for immediate sale and the sale is highly probable.

F$r4+(' EC/*&'(4 P&r7+/1-&r) !tandard C0change @ifferences S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 11 - The Cffects of "hanges in (*! 21 - The Cffects of "hanges #oreign C0change Rates in #oreign C0change Rates C0change differences on !imilar to (ndian $**=. con ersion of foreign currency e0change differences arising on loansGliabilities takenGincurred after translation or settlement of
;1

*pril 01. 200; in respect of foreign currency monetary items /ualifying assets is recogni:ed in are recogni:ed in profit or loss in the =rofit K >oss *ccountH or the period in which they arise. before +1 7arch 200; are capitali:ed in the carrying amount of these assets. Translation in the #oreign currency denominated consolidated current assets and current liabilities financial statements balances at the year-end are translated at the year end e0change rate circulated by #oreign C0change @ealers *ssociation of (ndia 4#C@*(6. and the gainsGlosses arising out of fluctuations in e0change rates are recogni:ed in the =rofit and >oss *ccount. #orward "ontracts *ssets and liabilities should be translated from functional currency to presentation currency at the closing rate at the date of the statement of financial positionH income and e0penses at actualGa erage rates for the periodH e0change differences are recogni:ed in other comprehensi e income and recycled to profit or loss on disposal of the operation. #orward e0change contract *ccounted as a deri ati e. (t is intended for trading or speculation co ered in (*! D +1- #inancial purposes(nstrument D Recognition and The premium or discount on the 7easurement. contract is ignored and at each balance sheet date. the alue of the contract is marked to its current market alue and the gain or loss on the contract is recogni:ed.

A//$1'7+'( 3$r I'84)7%4'7) P&r7+/1-&r) !tandard (n estments S7&'2&r2) 3$--$,42 1'24r I'2+&' GAAP *! 1+ *ccounting for (n estments (n estments are classified as longterm or current. O' 7r&')+7+$' 7$ IFRS

(*! +1 - #inancial (nstrumentsRecognition and 7easurement #inancial instruments are classified as at fair alue through profit or loss if it is held for >ong-term in estments are carried trading or has been designated as at cost less pro ision for diminution at fair alue through profit or loss in alue. upon initial recognition. "urrent in estments are carried at #inancial instruments are lower of cost and fair alue. classified as held for trading if these are ac/uired or incurred principally for the purpose of
20

selling or repurchase in the near future. is part of a portfolio that is managed together and for which there is e idence of recent actual pattern of short-term profit taking or deri ati e that is not a financial guarantee contract or is not designated as an effecti e hedging instrument. #inancial instruments can be designated at fair alue through profit or loss only if it eliminates or reduces measurement or recognition inconsistency or a group of financial instruments are managed and its performance e aluated on a fair alue basis in accordance with a documented risk management strategy and information about this group of instruments are pro ided to key management personnel. 8eld-to-maturity in estments are non-deri ati e financial assets with fi0ed or determinable payments and fi0ed maturity that an entity has positi e intent and ability to hold to maturity. 8eld to maturity in estments is measured at amorti:ed cost using effecti e interest method. (n estment in The entire instrument is accounted The holder maycon ertible bonds for as debt in estment. designate the hybrid instrument as at fair alue through profit or loss subject to certain conditions. or designate the debt element as a ailable for sale with changes in fair alue recogni:ed in e/uity and the con ersion option as a deri ati e with changes in fair alue recogni:ed in profit or loss. or recogni:e the debt element as
21

loans and recei ables and measure at amorti:ed cost and the con ersion option as a deri ati e with changes in fair alue recogni:ed in profit or loss. E%9-$D44 B4'43+7) P&r7+/1-&r) S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP !tandard *! 12 4Re ised 20026 - Cmployee (*! 11 - Cmployee ,enefits ,enefits (#R(" 1; - The >imit on a @efined ,enefit *sset. 7inimum #unding Re/uirements and their (nteraction (*! 11. *ctuarial @etailed actuarial aluation to !imilar. but detailed actuarial aluation determine present alue of the aluation to determine the present benefit obligation is carried out at alue of defined benefit least once e ery three years and fair obligation and the fair alue of alues of plan assets are determined plan assets is performed with at each balance sheet date. sufficient regularity so that the amounts recogni:ed in the financial statements do not differ materially from the amounts that would ha e been determined at the end of the reporting period. (*! 11. Cmployee Recogni:ed immediately in the - Recogni:ed immediately in benefits - actuarial statement of profit and loss as an profit or lossH gains and losses income or e0pense. - Recogni:ed immediately in other comprehensi e incomeH or - @eferred up to a ma0imum with any e0cess of 10Q of the greater of the defined benefit obligation or the fair alue of the plan assets at the end of the pre ious reporting period being recogni:ed o er the e0pected a erage remaining working li es of the participating employees or other accelerated basis. 22

4B6(#R(" 1;. The )o specific guidance. >imit on a @efined ,enefit *sset. 7inimum #unding Re/uirements and their (nteraction

*ddresses when refunds or reductions are regarded as a ailable for recognition of an assetH how funding re/uirements in future may effect the a ailability of reductions in future contributions and when minimum funding re/uirement may gi e rise to a liability. *n entity should recogni:e termination benefits as a liability and an e0pense only when it is demonstrably committed to either4i6 terminate the employment of an employee before the normal retirement dateH or 4ii6 pro ide termination benefits as a result of an offer made in order to encourage oluntary redundancy. !imilar but asset is limited to the lower of the net total of any unrecogni:ed actuarial losses and past ser ice cost and the present alue of any a ailable refunds from the plan or reduction in future contributions to the plan.

4B6Termination ,enefits

4B6*sset "eiling

*n entity should recogni:e termination benefits as a liability and an e0pense when. and only when 4a6 the entity has a present obligation as a result of a past e entH 4b6 it is probable that an outflow of resources embodying economic benefits will be re/uired to settle the obligationH and 4c6 a reliable estimate can be made of the amount of the obligation. (f the net amount determined to be recogni:ed in the balance sheet is negati e 4an asset6. recognition of the asset is limited to the lower of4a6 the asset resulting from applying the standard. and 4b6 the present alue of any economic benefits a ailable in the form of refunds from the plan or reductions in future contributions to the plan.

B$rr$,+'( C$)7) P&r7+/1-&r) !tandard Recognition S7&'2&r2) 3$--$,42 1'24r I'2+&' GAAP *! 13 - ,orrowing "osts ,orrowing cost that are directly attributable to ac/uisition. construction or production of /ualifying assets including capital work-in-progress are capitali:ed up to the date of commercial use of the O' 7r&')+7+$' 7$ IFRS (*! 2+ - ,orrowing "osts !imilar but borrowing costs are also e0pensed as incurred 4not permitted for /ualifying assets for which the capitali:ation date falls in annual periods beginning on or after 1 %anuary 20016.
2+

4B6"apitali:ation Rate

assets. Recogni:ing. as an e0pense when incurred is not permitted. )o disclosure re/uired. The disclosure re/uirements (*! 2+ re/uire the entity disclose separately capitali:ation rate used determine the amount borrowing costs.

of to the to of

S4(%4'7 R49$r7+'( P&r7+/1-&r) !tandard @etermination segments S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 1A - !egment Reporting (#R! 8 D 'perating !egments of *! 1A re/uires an enterprise to identify two sets of segments 4business and geographical6. using a risks and rewards approach. The company is engaged in airline related business. which is its primary business segment. and hence. segment results are not disclosed. The details of geographical wise re enue earned based on either the location of production or ser ice facilities and other assets of an enterpriseH or the location of its customers are specified for areas such as ?!*G"anadaH ?EGCuropeH *sia. *frica. K *ustraliaH and (ndia. The major re enue-earning asset of the company is the aircraft fleet. which is fle0ibly deployed across its worldwide route network. There is no suitable basis for allocation of assets to geographical segments. "onse/uently. area-wise assets are not disclosed. (#R! 8 re/uires operating segments to be identified on the basis of internal reports about components of the group that are regularly re iewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. #or each operating segment profit or loss needs to be recogni:ed by the chief decisionmaker.

7easurement

!egment profit or loss is reported on the same measurement basis as that used by the chief operating decision-maker. There is no definition of segment re enue. segment e0pense. segment result. and segment asset or segment liability.

Cntity disclosures

wide @isclosures of airline related Re/uires disclosure of 4a6 business as its primary business e0ternal re enues from each segment. product or ser iceH 4b6 re enues from customers in the country of
2;

domicile and from foreign countriesH 4c6 geographical information on non-current assets located in the country of domicile and foreign countries.

R4-&742 P&r7D D+)/-$)1r4) P&r7+/1-&r) !tandard (dentification S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 18 D Related =arty @isclosures (*! 2; - Related @isclosures

=arty

=ost employment benefit plans are Related party includes post not included as related parties. employment benefit plans for the benefit of employees of the reporting entity or any entity that is a related party of the reporting entity. Eey 7anagement )o other transactions with key "ompensation of key =ersonnel managerial personnel e0cept management personnel is Remuneration and =er/uisites to disclosed in total and separately "hairman K 7anaging @irector for 4a6 short-term employee and #unctional @irectors. benefitsH 4b6 post-employment Transactions such as pro iding benefitsH 4c6 other long-term *irline ser ices in the normal benefitsH 4d6 termination benefitsH course of *irline business are not and 4e6 share-based payments. included. 8owe er. compensation of key management personnel needs to be disclosed in total as an aggregate of all items. "lose relati es *! 18 includes specific relations as (*! 2; adopts a more 9substance relati es. o er form9 based approach in defining relati es as close members of the family. i.e.. who influence and can be influenced by the indi idual in hisG her dealings with the reporting entity. (nformation to be )ame of the related party and Relationships between parents disclosed nature of the related party and subsidiaries shall be disclosed relationship where control e0ists is and if neither the entity9s parent disclosed for key managerial nor the ultimate controlling party personnel and relati es. produces financial statements
22

The reporting entity should disclose the name. relationship. nature. olume of transactions and any other elements of the related party transactions necessary for an understanding of the financial statements. *ny outstanding items pertaining to related parties at the balance sheet date and pro isions for doubtful debts due from such parties at that date and amounts written-off or written-back in the period in respect of debts due from or to related parties.

a ailable for public use. the name of the ne0t most senior parent that does so shall also be disclosed. *n entity shall disclose the nature of the related party relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements. *t a minimum. disclosures shall include the amount of the transactions. amount of outstanding balances and their terms and conditions. pro isions for doubtful debts related to the amount of outstanding balances and the e0pense recogni:ed during the period in respect of bad or doubtful debts due from related parties.

L4&)4) P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 11 - >eases (*! 1A - >eases (#R(" ; - @etermining Jhether an *rrangement "ontains a >ease !(" 12 D 'perating >eases (ncenti es !(" 2A D C aluating the !ubstance of Transactions (n ol ing the >egal #orm of a >ease (#R(" 12 - !er ice "oncession *rrangements (nterest in leasehold >easehold land is recorded as fi0ed Recogni:ed as operating lease land assets. 4i.e. prepayment6 unless the leasehold interest is accounted for
23

!ale and >ease ,ack

(nitial direct costs of lessors for assets under a finance lease

(nitial direct costs of lessors for assets under a operating lease

4B6@etermining whether arrangement contains a lease

an

4B6C aluating the !ubstance of Transactions (n ol ing the >egal #orm of a >ease

as in estment property and the fair alue model is adopted. 4(*! 1A6 (f sale and leaseback transaction )o change. 4(*! 1A6 results in an operating lease. and it is clear that the transaction is established at fair alue. any profit or loss shall be recogni:ed immediately. (f sale and leaseback results in (f a sale and leaseback transaction finance lease. *! 11 re/uires results in a finance lease. any e0cessGdeficiency both to be e0cess of sales proceeds o er the deferred and amorti:ed o er the carrying amount shall be deferred lease term in proportion to the and amorti:ed o er the lease depreciation of the leased asset. term. 4(*! 1A6 (nitial direct costs are either (nitial direct costs are included in recogni:ed immediately in the the measurement of the finance statement of profit and loss or lease recei able and reduce the allocated against the finance amount of income recogni:ed income o er the lease term. o er the lease term. (nitial lease costs incurred by (nitial lease costs incurred by manufacturer or dealer lessors are manufacturer or dealer lessors are recogni:ed as e0pense at the recogni:ed as e0pense when inception of the lease. selling profit is recogni:ed. 4(*! 1A6 (nitial direct costs incurred by (nitial direct costs incurred by lessors are either deferred and lessors are added to the carrying allocated to income o er the lease amount of the leased asset and term in proportion to the recogni:ed as an e0pense o er the recognition of rent income. or are lease term on the same basis as recogni:ed as an e0pense in the lease income. 4(*! 1A6 statement of profit and loss in the period in which they are incurred. There is no such guidance. *rrangements that do not take the =ayments under such arrangements legal form of a lease but are recogni:ed in accordance with fulfillment of which is dependent the nature of e0pense incurred. on the use of specific assets and which con ey the rights to use the assets are accounted for as lease. 4(#R(" ;6 )o specific guidance. (f a series of transactions in ol es the legal form of a lease and can only be understood with reference to the series as a whole. then the series is accounted for as a single transaction. 4!(" 2A6
2A

4B6!er ice "oncession *rrangements recognition

)o specific guidance. D

@epending on the terms of the arrangement. a financial asset is recogni:ed where an operator has the unconditional right to recei e cash or other financial asset from the grantor o er the life of the arrangement. 4(#R(" 126

E&r'+'() 94r )*&r4 P&r7+/1-&r) !tandard ,asic C=! S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 20 D Carnings =er !hare (*! ++ - Carnings per share ,asic earnings per share are calculated by di iding the net profit or loss for the period attributable to e/uity shareholders by the weighted a erage number of e/uity shares outstanding during the period. *n entity shall calculate basic earnings per share amounts for profit or loss attributable to ordinary e/uity holders of the parent entity and. if presented. profit or loss from continuing operations attributable to those e/uity holders. (*! ++ permits that such disclosure be made only in the consolidated financial statements of the parent i.e. an entity being a parent who presents consolidated financial statements may elect not to make these disclosures in its separate financial statements.

@isclosure in *! 20 re/uires disclosure of basic separate financial and diluted C=! information both in statements the separate and consolidated financial statements of the parent.

4B6(*! ++. Carnings *! 20 does not re/uire these (*! ++ re/uires additional per share - disclosure disclosures. disclosures for C=! from continuing and discontinued operations. @isclosure is also re/uired for instruments that could potentially dilute basic earnings per share in the future. but were not included in the calculation of diluted earnings per share because they are antidiluti e for the periods presented. (*! ++. Carnings =er The control number for determining The control number for
28

!hare - dilution is net profit or loss from C0traordinary items continuing ordinary acti ities. C=! with and without e0traordinary items is to be presented.

determining dilution is net profit or loss from continuing acti ities since no item can be presented as e0traordinary item.

C$')$-+2&742 F+'&'/+&- S7&74%4'7) P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 21 - "onsolidated #inancial (*! 2A 420086 - "onsolidated and !tatements !eparate #inancial !tatements !(" 12 "onsolidation - !pecial =urpose Cntities (ndian $**= does not specify * parent is re/uired to prepare entities that are re/uired to present consolidated financial statements consolidated financial statements. to consolidate all its subsidiaries. * parent need not prepare consolidated financial statements only if all the following conditions are met the entity9s debt or e/uity instruments are not traded in a public marketH the entity is not in a process of filing its financial statements for the purposes of issuing any class of instruments in a public marketH and any intermediate parent of the entity produces consolidated financial statements a ailable for public use that comply with (#R!Is. "ontrol is"ontrol is the power to go ern the 4a6 the ownership. directly or financial and operating policies of indirectly through subsidiaries. of an entity so as to obtain benefits more than one-half of the oting from its acti ities. power of an enterpriseH or 4b6 control of the composition of the board of directors in the case of a company or of the composition of the corresponding go erning body so as to obtain economic benefits
21

4B6!cope

"ontrol

from its acti ities. =otential oting =otential oting rights are not The effect of potential oting rights considered in assessing control. rights that are currently e0ercisable or con ertible. including potential oting rights held by another entity. are considered when assessing control. C0clusion of C0cluded from consolidation. (f on ac/uisition a subsidiary subsidiaries. e/uity accounting or proportionate meets the criteria to be classified associates and joint consolidation if the subsidiary was as held for sale in accordance entures ac/uired with intent to dispose of with (#R! 2. it is included in the within twel e months or if it consolidation but is accounted for operates under se ere long-term under that standard. restrictions which significantly impair its ability to transfer funds to the parent. Reporting dates The difference between the The difference between the reporting date of the subsidiary and reporting date of the subsidiary that of the parent shall be no more and that of the parent shall be no than si0 months. more than three months. *ccounting for *ccounted at cost less impairment *ccounted either at cost less in estments in loss. impairment loss or as a ailable subsidiaries in for sale with changes in fair alue separate financial recogni:ed in other statements of the comprehensi e income. parent 4B6$oodwill $oodwill or capital reser e is $oodwill or capital reser e is determined on historical cost basis. determined on the basis of assets or liabilities considered at their fair alue. amorti:ation is also pro ided. D434rr42 T&C A))47 P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' GAAP *! 22 - *ccounting for Ta0es on (ncome $uidance )ote on *ccounting for #ringe ,enefits Ta0 O' 7r&')+7+$' 7$ IFRS (*! 12 - (ncome Ta0es !(" 21 - (ncome Ta0es Reco ery of Re alued )on@epreciable *ssets !(" 22 - (ncome Ta0es - "hanges in the Ta0 !tatus of an Cntity or
30

its !hareholders @eferred ta0es income @eferred ta0es are computed for timing differences in respect of recognition of items of profit or loss for the purposes of financial reporting and for income ta0es. @eferred ta0es are computed for temporary differences between the carrying amount of an asset or liability in the statement of financial position and its ta0 base.

Recognition of @eferred ta0es are generally @eferred income ta0es are deferred ta0 assets recogni:ed for all timing recogni:ed for all temporary and liabilities differences. differences between accounting and ta0 base of assets and liabilities. 4B6Recognition of )o specific guidance in *! 22 "urrent ta0 and deferred ta0 is ta0es on items recogni:ed outside profit or loss if recogni:ed in other the ta0 relates to items that are comprehensi e recogni:ed in the same or a income or directly in different period. outside profit or e/uity loss. Therefore the ta0 on items recogni:ed in other comprehensi e income or directly in e/uity. is also recorded in other comprehensi e income or in e/uity. as appropriate. Recognition of @eferred ta0 asset for unused ta0 @eferred ta0 asset is recogni:ed deferred ta0 assets losses and unabsorbed depreciation for carry forward unused ta0 is recogni:ed only to the e0tent that losses and unused ta0 credits to there is irtual certainty supported the e0tent that it is probable that by con incing e idence that future ta0able profit will be sufficient future ta0able income a ailable against which the will be a ailable against which such unused ta0 losses and ta0 credits deferred ta0 assets can be reali:ed. can be utili:ed. 4B6@eferred ta0 )o specific guidance. (f the potential benefit of the business ac/uiree9s income ta0 loss carrycombinations forwards or other deferred ta0 assets did not satisfy the criteria in (#R! + for separate recognition when the business combination was initially accounted but if such benefit is subse/uently recogni:ed. goodwill is reduced to record pre-ac/uisition deferred ta0 assets which are recogni:ed within 12 months of the ac/uisition date as result of new information on facts and
31

"lassification

4B6@isclosure

#ringe ,enefit ta0

4B6!(" 21. Reco ery of Re alued )on@epreciable *ssets 4B6!(" 22. "hanges in Ta0 !tatus of an Cntity or its !hareholders

circumstances that e0isted on the ac/uisition date. @eferred ta0 assets are to be *lways classified as non-current. disclosed on the face of the balance if current and non-current sheet separately after the head classification is presented. 9(n estments9. @eferred ta0 liabilities are to be disclosed after the head 9?nsecured >oans9. )o such re/uirement. Reconciliation is presented between the income ta0 e0pense 4income6 reported and the product of accounting profit multiplied by the applicable ta0 rate. ?nrecogni:ed deferred ta0 liability on undistributed earnings of subsidiaries. branches. associates and joint entures. #ringe benefit ta0 is to be disclosed @oes not meet definition of as a separate item after determining income ta0es and is reported as profit before ta0 for the period in part of the underlying e0pense. which the related fringe benefits are recogni:ed. )o specific guidance. 7easurement of deferred ta0 liability or asset arising from re aluation is based on the ta0 conse/uences from the sale of asset rather than through use. )o specific guidance. "urrent and deferred ta0 conse/uences are included in the profit or loss of the period of change unless the conse/uences relate to transactions or e ents recogni:ed outside profit or loss either in other comprehensi e income or directly in e/uity in the same or a different period.

I'84)7%4'7) +' A))$/+&74) P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 2+ *ccounting for (*! 28 - (n estments (n estments in *ssociates in *ssociates "onsolidated #inancial !tatements

in

32

!ignificant influence

=otential oting rights are not The e0istence and effect of considered in assessing significant potential oting rights that are influence. currently e0ercisable or con ertible are considered when assessing significant influence. "urrently there is no e0emption for in estments made by enture capital organi:ations. mutual funds. unit trusts and similar entities from applying e/uity method. (n estments by enture capital organi:ations. mutual funds. unit trusts and similar entities including in estment-linked insurance funds are e0empted from applying e/uity method. if an election is made to measure such in estments at fair alue through profit or loss under (*! +1. !imilar but if the reporting entity does not prepare consolidated financial statements because it has no subsidiaries. its associates should be e/uity accounted. )egati e goodwill is e0cluded from the carrying amount of in estment and is included as income in determination of the in estor9s share of associate9s profit or loss. Cither at cost or at fair alue as a ailable for sale with changes in fair alue recogni:ed in other comprehensi e income.

!cope

*ccounting (n The C/uity method. "onsolidated (f the reporting entity does not ha e #inancial !tatements subsidiaries but has an associate. it would not be re/uired to prepare consolidated financial statements. 4B6"apital "apital reser e arising on the Reser eG)egati e ac/uisition of an associate by an $oodwill in estor should be included in the carrying amount of in estment in the associate but should be disclosed separately. !eparate #inancial *t cost less impairment loss. !tatement 'f The (n estor

D+)/$'7+'1+'( O94r&7+$') P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 2; - @iscontinuing 'perations (#R! 2 - )on-current assets held for sale and discontinued operations *n operation is classified as discontinuing at the earlier of 4a6 binding sale agreement for sale of the operation and 4b6 on appro al *n operation is classified as discontinued when it has either been disposed of or is classified as held for sale.
3+

4B6"lassification

by the board of directors of a detailed formal plan and announcement of the plan.

I'74r+% F+'&'/+&- R49$r7+'( P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 22 - (nterim #inancial (*! +; - (nterim #inancial Reporting Reporting. !imilar and there are no material differences between two standards.

4B6"ompliance with "ondensed ,alance !heet. !imilar but "ondensed !tatement re/uirements of law. "ondensed (ncome !tatement. of "hanges in C/uity is re/uired. etc. "ondensed "ash #low. C0planatory )otes and disclosures like C=! etc. is re/uired. 4B67inimum content * statute go erning an entity or a @oes not recogni:e lawG regulator of (nterim financial regulator may re/uire an entity to prescribing format of financial reporting prepare and present certain statements. information at an interim date. which may be different in form and Gor content as re/uired by *! 22.

I'7&'(+5-4 A))47) P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 23 - (ntangible *ssets (*! +3 D (mpairment of *ssets (*! +8 D (ntangible *ssets 7easurement 7easured only at cost. (ntangible assets can be measured at either cost or re alued amounts.
3;

?seful life

(ntangible assets are amorti:ed o er ?seful life may be finite or their useful life or fi e years indefinite. whiche er is lower. $oodwill and indefinite life intangible assets are re/uired to be tested for impairment at least on an annual basis or earlier if there is an impairment indication.

*nnual impairment (ntangible assets are amorti:ed o er test for goodwill and their useful life or fi e years intangibles whiche er is lower to be assessed for impairment at least at each financial year end.

P&r7+/1-&r) !tandard

S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 2A - #inancial Reporting of (*! +1 D (nterests in %oint (nterests in %oint 5entures 5entures !(" 1+ - %ointly "ontrolled Cntities )on-7onetary "ontributions by 5enturers *t cost less impairment loss. Cither at cost or at fair alue as a ailable for sale in estment with changes in fair alue recogni:ed as a component of comprehensi e income. *t cost less impairment if (f the reporting entity does not consolidated financial statements prepare consolidated financial are not prepared. statements because it has no subsidiaries. its jointly controlled entities should be either proportionately consolidated or e/uity accounted. C/uity method accounting is not (n estments in jointly controlled permitted. entities can be proportionately consolidated or e/uity accounted by the enturer. There is no such e0emption. (*! +1 is not applicable for in estments made by enture capital organisations. mutual funds. unit trusts and similar entities including in estmentlinked insurance funds that upon initial recognition are classified as at fair alue through profit or loss under (*! +1.
32

(*! +1. (nterests in %oint 5entures D separate financial statement of the enture (*! +1. (nterests in %oint 5entures D consolidated financial statements

(*! +1. (nterests in %oint 5entures D alternati e accounting methods. (*! +1. (nterests in %oint 5entures other arrangements

!(" 1+ - )on- )o specific guidance. 7onetary "ontributions by 5entures

Recognition of proportionate share of gains or losses on contributions of non-monetary assets in e0change for an e/uity interest is generally appropriate.

I%9&+r%4'7 $3 A))47)

P&r7+/1-&r) !tandard

S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 28 - (mpairment of *ssets (*! +3 D (mpairment of *ssets (#R(" 10 D (nterim Reporting and (mpairment *llocated to cash generating units that are e0pected to benefit from the synergies of business combination. *llocated to the lowest le el at which goodwill is internally monitored by management. which should be larger than an operating segment. Jhere an entity has recogni:ed an impairment loss in an interim period in respect of goodwill or an in estment in either an e/uity instrument or a financial asset carried at cost. that impairment is not re ersed in subse/uent interim financial statements nor in annual financial statements.

1oodwill

?ses <bottom-upG top-down< approach under which the goodwill is. in effect. tested for impairment by allocating its carrying amount to each cash-generating unit to which portion of that carrying amount can be allocated on reasonable and consistent basis.

4B6(#R(" 10. (nterim )o corresponding pronouncement Reporting and to (#R(" 10. (mpairment

Pr$8+)+$'): C$'7+'(4'7 A))47) &'2 C$'7+'(4'7 L+&5+-+7+4) P&r7+/1-&r) !tandard S7&'2&r2) 3$--$,42 1'24r I'2+&' O' 7r&')+7+$' 7$ IFRS GAAP *! 21 - =ro isions. "ontingent (*! +A - =ro isions. "ontingent >iabilities and "ontingent *ssets >iabilities and "ontingent *ssets (#R(" 1 D "hanges in C0isting @ecommissioning. Restoration and !imilar >iabilities
33

(#R(" 2 - Rights to (nterests arising from @ecommissioning. Restoration and Cn ironmental #unds (#R(" 3 - >iabilities arising from =articipating in a !pecific 7arket D Jaste Clectrical and Clectronic C/uipment of =ro isions in ol ing a substantial )o change. degree of estimation in measurement are recogni:ed when there is a present obligation as a result of past e ents and it is probable that there will be an outflow of resources. =ro isions are adjusted for changes in the amount or timing of future costs and for changes in market-based discount rates. @eals with the accounting in the financial statements of the contributor for interests in decommissioning. restoration and en ironmental rehabilitation funds established to fund some or all of the costs of decommissioning assets or to undertake en ironmental rehabilitation.

Recognition pro isions

4B6(#R(" 1. "hanges )o specific guidance. in C0isting @ecommissioning. Restoration and !imilar >iabilities 4B6(#R(" 2. Rights )o specific guidance. to (nterests arising from @ecommissioning. Restoration and Cn ironmental #unds

4B6(#R(" 3. )o specific guidance. >iabilities arising from =articipating in a !pecific 7arket Jaste Clectrical and Clectronic C/uipment 4B6"ontingent assets

=ro ides guidance for liabilities for waste management costs and re/uires recognition of an obligation to contribute to the costs of disposing of waste e/uipment based on the entity9s share of market in the measurement period. "ontingent assets are not disclosed "ontingent assets are disclosed in in the financial statements. the financial statements where an inflow of economic benefits is probable.
3A

4B6Restructuring cost Re/uires recognition based on general recognition criteria for pro isions i.e. when the entity has a present obligation as a result of past e ent and the liability is considered probable and can be reliably estimated.

(*! +A re/uires pro isions on the basis of constructi e obligations. * constructi e obligation to restructure arises only when an entity has a detailed formal plan for the restructuring and has raised a alid e0pectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

N4, )7&'2&r2) AS 30: AS 3# &'2 AS 3! &r4 r4/4'7-D 54+'( 9r$9$)42 5D I'2+&' GAAP F+'&'/+&- I')7r1%4'7)H R4/$('+7+$' &'2 M4&)1r4%4'7 P&r7+/1-&r) !tandard I'2+&' GAAP O' 7r&')+7+$' 7$ IFRS *! +0 - #inancial (nstruments- (*! +1 - #inancial (nstrumentsRecognition and 7easurement Recognition and 7easurement (#R(" 1 - Reassessment of Cmbedded @eri ati es *ll financial assets. financial liabilities and deri ati es are recogni:ed in the statement of financial position when these meet the definition and recognition criteria of a financial instrument.

$eneral Recognition There is no definition of financial =rinciple instrument. "urrently. deri ati es are not re/uired to be recogni:ed in the balance sheet e0cept for certain forward e0change contracts within the scope of *! 11.

@eri ati es and embedded deri ati es @eri ati es and hedge accounting

)o e/ui alent deri ati es. )o e/ui alent deri ati es.

standard standard

* financial instrument is a contract that gi es rise to a financial asset in one entity and a financial liability or e/uity in another entity. on 7easured at fair alue. on 8edge accounting 4recogni:ing the offsetting effects of fair alue changes of both the hedging instrument and the hedged item in the same period9s profit or loss6 is permitted in certain circumstances.
38

pro ided that the hedging relationship is clearly defined. measurable. and actually effecti e. (*! +1 pro ides for three types of hedges fair alue hedge- if an entity hedges a change in fair alue of a recogni:ed asset or liability or firm commitment. the change in fair alues of both the hedging instrument and the hedged item are recogni:ed in profit or loss when they occurH cash flow hedge- if an entity hedges changes in the future cash flows relating to a recogni:ed asset or liability or a highly probable forecast transaction. then the change in fair alue of the hedging instrument is recogni:ed in other comprehensi e income until such time as those future cash flows occur. The ineffecti e portion of the gain or loss on the hedging instrument is recogni:ed in profit or loss in the period of such changeH and hedge of a net in estment in a foreign entity- this is treated as a cash flow hedge. * hedge of foreign currency risk in a firm commitment may be accounted for as a fair alue hedge or as a cash flow hedge. @erecognition of )o specific financial liabilities derecognition liabilities. guidance on #inancial liabilities are of financial derecogni:ed only when the obligation specified in the contract is discharged or cancelled or ha e e0pired.

31

F+'&'/+&- I')7r1%4'7) Pr4)4'7&7+$' P&r7+/1-&r) !tandard I'2+&' GAAP O' 7r&')+7+$' 7$ IFRS *! +1 - #inancial (nstruments- (*! +2 - #inancial (nstruments=resentation =resentation "apital instruments are classified as liability or e/uity depending on the issuer9s contractual obligation to deli er cash or other financial asset. for e0ample redeemable preference shares will be classified as financial liability.

"lassification 'f "apital instruments are classified #inancial >iabilities based on legal form - redeemable preference shares will be classified as e/uity.

Treasury !hares

*c/uiring own shares is permitted (f an entity reac/uires its own only in limited circumstances. shares 4treasury shares6. these are !hares repurchased should be shown as deduction from e/uity. cancelled immediately and cannot be held as treasury shares. There are no offset rules. #inancial asset and financial liability can only be offset if the entity has a legally enforceable right to set off the recogni:ed amounts and intends to either settle on a net basis. or to reali:e the asset and settle the liability simultaneously.

'ffsetting

"lassification of "urrently. the entire instrument is !plit the instrument in liability and "on ertible @ebts classified as debt based on its legal e/uity component at issuance. form and any interest e0pense is recogni:ed based on the coupon rate.

IFRS IMPLEMENTATION AT NACIL---ANALYSIS

I'7r$21/7+$' $3 NACIL

A0

)ational * iation "ompany of (ndia >imited 4)*"(>6 is a $o ernment "ompany within the meaning of !ection 31A of the "ompanies *ct. 1123 and is under the administrati e control of the 7inistry of "i il * iation. )ational * iation "ompany of (ndia >imited has been established as a $o ernment "ompany to be engaged in the business as an airline for pro iding air transport and allied ser ices. This !cheme proposes the amalgamation of *( and (* in the Transferee "ompany. which would result in consolidation of the business of all in one entity 4i.e. )ational * iation "ompany of (ndia >imited. the Transferee "ompany6. *(R ()@(* >imited 4M*(N or the MTransferor )o 1 "ompanyN6 is a "ompany incorporated under the "ompanies *ct. 1123. ha ing its registered office at *ir (ndia >td. +rd #loor. Tower-((. %ee an ,harati. 12;. "onnaught "ircus. )ew @elhi - 110 001. *( is a $o ernment "ompany. within the meaning of !ection 31A of the "ompanies *ct. 1123 and is under the administrati e control of the 7inistry of "i il * iation. $o ernment of (ndia. *( is an unlisted "ompany. *( is primarily engaged in the business as an airline for pro iding air transport and allied ser ices. (ndian *irlines >imited 4M(*N or the MTransferor )o 2 "ompanyN6 is a public company registered under the "ompanies *ct. 1123 and ha ing its registered office at 11+. $urudwara Rakabganj Road. )ew @elhi 110 001. (* is a $o ernment "ompany within the meaning of !ection 31A of the "ompanies *ct. 1123 and is under the administrati e control of the 7inistry of "i il * iation. (* is an unlisted company. (* is primarily engaged in the business as an airline for pro iding air transport and allied ser ices. )ational * iation "ompany of (ndia >imited 4the Transferee "ompany6 is a "ompany incorporated under the "ompanies *ct1123. ha ing its registered office at *irlines 8ouse. 11+ $urudwara Rakabganj Road. )ew @elhi 110 001. PROFILE OF FINANCE DEPARTMENT OF NACIL (I) The present competiti e en ironment of business has put the focus on a ailability of finance for an operation of the company and as such #inance department plays a major role in growth and sur i al of the company. The #inance department has become an integral part of the management decision making process for planning. organi:ing K implementing operations of the company. #inance department has to analy:e the past K current dataGperformancesGtrends to forecast future planning.

A1

'ne of the main acti ities of #inance besides sourcing of finance for operations is to relate the entire acti ity of the airlines into financial terms and relate e0penditure into its category and recogni:e re enue. ,y booking the re enue and e0penditure into appropriate heads the finance department has to describe the company. The ,alance !heet K a =rofit K >oss aGc duly audited has to be prepared as on 7arch +1st e ery year. ROLE OF FINANCE DEPARTMENT IN NACIL (I) 7anagement of #inancial Resources =lanning K ,udgetary "ontrol *d isory #unctions #inancial !crutiny and "hecks 7aintain #inancial K "ost *ccounts *nalysis of arious costs and submitting reports. OBJECTIVES OF FINANCE DEPARTMENT !ubmitting the Regional =rofit K >oss aGc K ,alance !heet as on +1st 7arch e ery year. Cnsuring "ompliance of !tatutory laws - Ta0ationG*ccounting standards. Cnsuring audit of *nnual accounts K @ealing with !tatutory *uditorsG$o ernment *uditorsG (nternal auditors. =reparing yearly Re enue ,udget K "apital ,udget of the Region. *d isory role to the Regional @irector in financial matters. "on eying financial sanctions. analysis of financial dataGand also as a #inance nominee in arious contracts. ACCOUNTING SYSTEM OF WESTERN REGION IN NACIL The accounting at Jestern Region can be di ided into1. C0penditure *ccounting including )on-traffic re enue. 2. #oreign !tation *ccounting +. Re enue *ccounting II EC94'2+71r4 D+8+)+$')H

A2

 C0penditure on aircraft fuel. insurance. aircraft spares. aircraft loan interest payments are taken care at head/uarters. *ll other e0penditures regions. C0penditure @i ision is further di ided into different sections as under1. S7$r4) A//$1'7+'(H @ealing with transactions routed through !tores department by means of =urchase 'rders. #urther @i ided into a. F$r4+(' A//$1'7+'(H @ealing with receipt and dispatch of goods monitored by =urchaseGRepair orders in respect of aircraft items imported from foreign endors. The payments ad ices recei ed from head/uarters through @ebitG"redit notes are linked to $R*) by this section. *ccounting of all foreign transactions related to store e0penditure is done by this section along with reconciliation of stock accounts. accounting of duty. freight. and e0port freight are carried out. b. L$/&- P1r/*&)4H @ealing with receipt. dispatch and payment of >ocal =urchase transactions routed through =urchaseGRepairG7aintenance orders. *ccountings of transactions into respecti e accounts along with reconciliation of !tock accounts are being done. c. C$)7+'( )4/7+$'H Raising of ,ills in respect of jobs undertaken for 'utside parties. >oan items. and monitoring e0penditure related to accident jobs undertaken on aircraft work orders. =lus accounting for 7aterial issues and preparation of si0 monthly "ost statements like >abor ?tili:ation. 7aterial costs. 2. B+-- P&))+'( D+8+)+$'H @eals with payments of "ontractual nature and !taff claims including medical billsa. O17)+24 P&r7D 9&D%4'7)H =ayments like "atering bills. "rew *ccommodation bills. paying of **( charges like >anding. )a igation. =arking. >icense #ees. Rentals. =roperty Ta0es. Clectricity. Jater. Telephone. "anteen . 8ire of Transport. etc. which are being done by scrutiny. certification etc. *lso deals with raising of bills on i:. !alaries. staff payments. landing. housing. parking to **(4*irport *uthority of (ndia6. maintenance of aircraft. outside repairs are taken care at

A+

'ther 'perators for handling ser ices rendered. *lso deals with imprest accounting of cash floats gi en to different locationsGstations. b. S7&33 C-&+%)H Tra eling allowances. "laims for meals. con eyances. and settlement of all medical bills. "#7! claims. and 8ospitali:ation bills of ser ingGretired personnel. +. P&D-R$--)H @eals with salary processing of the Jestern Region staff by means of change ad ices in respect of any change in the salary /uantum of each staff. The section is di ided into category wise reporting of the salary. *lso deals with (ncome-ta0 matters of staff like declarations. payments of ta0 deducted to (ncome Ta0 department. 8a e regionally implemented the salary processing and printing of pay slips of the staff. A F+'&- )477-4%4'7 )4/7+$' deals with all paymentsGreco eries of staff that cease to be in ser ice. =ayment of $ratuity. =ro ident #und. and Cncashment of >ea e etc in respect of cess staff is done by the section. *lso deals with the monitoring of >oans granted to any employee by the company. ;. C&)* @ B&'0H 8ead/uarters makes periodical transfer to the @isbursement account through which the payments of che/uesGwithdrawals of cash are made. =rocessing of all payments by che/ues to outside parties. cash payments towards staff claims. salary payments. 7onitoring of cashGbank balances at base and at different locations. 8as implemented the Clectronic "learing system for clearances of salary. 2. F+'&'/4 @ B12(47H To draw the yearly Trial ,alance. ,alance-sheet as per "orporation format. !chedule 5( format and getting the same audited. 7onitoring of sanctions con eyed for arious e0penditure. @eals also with settlement of "i il Cngineering bills of arious projects. *lso deals with settlements of baggageGcargo claims of passengers. co erage of insurance in respect of cashGstaff etc. =ro ide for depreciation of assets of Jestern region. Reconciliation of all assets with stores ledger. 8a e adopted a customi:ed computeri:ed system of financial accounting package for their work.

A;

M+)/4--&'4$1)H ,esides. finance nominees are in arious tender committees constitutes a part of regular arious mandatory committees for !tores tender K "i il tenders. #inance also deals with auditors. Ta0 auditors. =# auditors etc. III F$r4+(' S7&7+$' A//$1'7+'( Cstablished in Jestern Region to cater to the needs of #oreign !tations under the region. $ulf region accounting is done in Jestern Region.

agencies K authorities like (ncome ta0. !ales ta0. !er ice ta0. $o ernment auditors. statutory

*t present. the following stations in $ulf with )*"(> 4(6 are managed through $!* 4$eneral !ales *gency6Sr. N$. 1 2 + ; 2 S7&7+$' ?*C 4!8%. @R,. #?%. R*!6 7uscat D 'man ,ahrain Euwait Riyadh D Eingdom of !audi *rabia GSA 7Gs. *rabian Tra el *gency >td. 7Gs. )ational Tra el K Tourism 7Gs. @adabhai Tra el 7Gs. 8ouse of Tra el 7Gs. )aba Tourism K Transport "o. >td.

(n (srael 4off-line station6. we ha e 7Gs.Turbo Tourism K * iation >td. as =assenger !ales *gent. PAYMENTSH a. $!* makes all payments in the !tation on the appro al of "ountry 7anagerG*ccounts 7anager out of Re enue collection at the station. b. The !tatement for =ayments along with supporting ,illsG ouchers is forwarded by $!* to the Regional 'ffice on monthly basis e0cept Euwait where the Reports are prepared on fortnightly basis. c. 'n scrutiny of the payments accounting action is taken at the Regional #inance @ept. and entries are booked in ()R. d. @ebit )otes are raised in respect of the following paymentsi. F14-- @ebit )ote is forwarded to head/uarters on monthly basis.
A2

ii. iii.

A28&'/4 7$ C&5+' /r4,G E'(+'44r): 74/*'+/+&' - amount paid to staff from other Region is debited to concerned Region through @ebit )otes. L$/&- T&C4)-@ebit )ote is forwarded to "R*.

e. T*4 %&6$r *4&2) $3 &//$1'7 &r4 -8otel *ccommodation. Tra eling *d ance. #uel. *irport Ta0es. Reimbursement of out of pocket e0penses to #lying "rew. !ales =romotion. =ublicity. #ood !er ice 4"abin "rew. "ockpit "rew6. 7eal to =assenger. 8andling C0penses. >anding #ees. )a igation "harges. !alary. 8ire of Transport. "on eyance. 8ousing K =arking #ee. Telephone etc. The abo e mentioned accounts are reflected in Regional Trial ,alance. =rofit and >oss !tatement K ,alance-!heet. (n case it is proposed to ha e Regional Trial ,alance for $ulf including )*"(> 4*6. the abo e accounting procedure needs to be followed in respect of accounts maintained by )*"(> 4*6 at respecti e stations. IIII R484'14 A//$1'7+'( i. ii. iii. Re enue collections of these stations 4including agents6 are sent to head/uarters on day to day basis. "entral re enue accounts 4"R*6 situated at head/uarters compile the collections of all stations and work out the re enue of the company. 'ther re enue i:. handling. outside party works etc are accounted for at the regions. TD94) $3 R484'14 +' NACIL (I)H Traffic - passenger. e0cess baggage. freight. mail. charter and aircraft lease. (ncidental - handling. outside party repair. "ancellation fee and "ommission )on-operating D ,ank interest. sale of surplus assets arious re enue

S4/7+$') +' R484'14 D49&r7%4'7 'utstation !creening !tation *ccounts ,ills Recei ables *gency !ection "argo *gency
A3

#. O17)7&7+$' S/r44'+'( !creening. cross-checking and erifying all re enue documents reported at 'utstations 7aintenance of "5@ control statement at outstations K reconciliation. @ispatch of documents to C@=G"R*. Raising debit notes for short collectionGbilling.

!. S7&7+$' A//$1'7) (ndependent accounting unit set up at all stations in the )*"(> network to ser ice the agents and direct sales. Reports the sales in appropriate forms and deposits the collection in banks. 7eeting the petty cash e0penditure. !tation @ebit Reco ery. 5arious acti ities (ssuing "5@s. recei ing #G) sales reports. Reali:ation of dues and erifying stock statement. @ispatch of reports to *R@G"R*.

3. B+--) R4/4+8&5-4) !creening K cross-checking of bills K in oices through C@= "ontrolling K *ccounting of "redit !ales @ispatch of bills ,illing K *ccounting of charter re enue "ontrolling K *ccounting of to-pay transactions "ompilation of arious reports.

;. A(4'/D

AA

*gency is a retailer of tra el and related products. Jhilst this refers to the sales person employed to sell tra el products. the term is often applied in reference to the business that is established to sell tra el products 4the tra el agency6. *gency means a person G group of persons G body who is an interface between the customer and the airlines by selling the airlines product i.e. !pace. (n airlines the space sold is in form of passenger seats or cargo space. Today almost 82Q of the sales of passenger tickets of )*"(> 4(6 are through agents. *s such agency accounting forms a ery important function. <. C&r($ R484'14 "argo sales are generated from different *irports and through *gents. "argo sales of *irport are being accounted at "R*. *R@ reports for sales generated through agents and their reali:ation to "R*. The cargo system has been automated through which automated *irway ,ills are generated through system de eloped by 7Gs. Eale "onsultancy. (t pro ides airlines with full financial control and automation of their re enue accounting process. (t deli ers business alue by helping to ma0imi:e re enue. minimi:e costs. and shorten the time span to billing. thereby enabling increased cash flow.

STEPS FOR TRANSITION TO IFRS FOR NACIL

IFRS -# (F+r)7-T+%4 A2$97+$' $3 IFRS) (#R! 1. #irst Time *doption of (nternational #inancial Reporting !tandards is the guidance that is applied during preparation of a companyIs first (#R!-based financial statements. )*"(> need to apply (#R! 1 when they transition from (ndian $**= to (#R! and prepare their first (#R!-based financial statements. The date of transition to (#R! is defined as the Mthe beginning of the earliest period for which an entity presents full comparati e information under (#R! in its first (#R! financial statementsN. * first-time adopter is re/uired to prepare an opening balance sheet at the date of transition. This opening balance sheet is prepared in accordance with (#R! 1. including the
A8

general principle of retrospecti e application. the optional e0emptions and mandatory e0ceptions. The opening (#R! balance sheet need not be published as part of the first (#R! financial statementsH howe er it is used as a basis for preparation of those financial statements. The following timetable illustrates first-time adoption of (#R! in 2010 for financial year where comparati e statements is prepared for one year D
Opening IFRS Balance Sheet Approach 2010 01.04.2010 01.04.2010
Previous Indian GAAP Reporting Reporting Date

2011 31.03.2011 31.03.2012

2012 Time

Date of Transition to IFRS

(n short. the entityIs first (#R! financial statements shall include at least three statements of financial position. two statements of comprehensi e income. two separate income statements 4if presented6. two statements of cash flows and two statements of changes in e/uity and related notes. including comparati e information. * first time adopter of (#R! is re/uired to comply with all (#R! standards effecti e at the reporting date with preparation of opening balance sheet in accordance with the pro isions of (#R! 1. * first-time adopter is re/uired to Recogni:e all assets and liabilities whose recognition is re/uired by (#R!H )ot recogni:e items as assets and liabilities if (#R! does not permit such recognitionH Reclassify items recogni:ed under pre ious $**= as one type of asset. liability or component of e/uity. but are a different type of asset. liability or component of e/uity under (#R!H and *pply (#R! in measuring all recogni:ed assets and liabilities.

First IFRS with IFRS comparatives for 2011

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*ll (#R! presentation and disclosure re/uirements shall be fulfilled in the first (#R! financial statements. (n particular. some of the standards. which may ha e a significant impact on an entityIs presentation and disclosure re/uirements. areH (*! 1; !egment Reporting. (*! 11 Cmployee ,enefits. (*! +2 #inancial (nstruments. (*! ++ Carnings per !hare. (*! +3 (mpairment of *ssets. (*! +8 (ntangible *ssets. (#R! 2 !hare-based =ayment. (#R! + ,usiness "ombinations. and (#R! 2 )on-current *ssets 8eld for !ale and @iscontinued 'perations O97+$'&- 4C4%97+$') (n a number of areas. retrospecti e application of (#R! will re/uire significant resources and may in certain situations be impracticable. (#R! 1 therefore pro ides ten optional e0emptions to the general principle of retrospecti e application. *s these e0emptions are optional. entities may change their accounting policies retrospecti ely in these areas if they desire. pro ided that they are able to calculate the effects reliably. *n entity that elects to apply one of the below e0emptions is not re/uired to apply any or all of the other e0emptions. *nalogous application of the abo e e0emptions to other areas is not permitted. B1)+'4)) /$%5+'&7+$') *n entity may apply (#R! + to business combinations prior to the date of transition pro ided that it obtained the information necessary to apply (#R! + at the date of the business combination. ,usiness combinations before the date from which (#R! + are applied are accounted for in accordance with (#R! 1. *ppendi0 ,2. *ssets and liabilities ac/uired in a business combination shall be recogni:ed and measured in the opening balance sheet in accordance with (#R!. $oodwill written off against e/uity under (ndian $**= shall neither be
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recogni:ed as an asset in the opening (#R! balance sheet nor included in the gain or loss on subse/uent disposal or impairment of the subsidiary that ga e rise to it. F&+r 8&-14 $r r48&-1&7+$' &) 244%42 /$)7 * first-time adopter may elect to measure indi idual items of property. plant and e/uipment at fair alue at the date of transition to (#R!. #air alue is then deemed cost at that date. @eemed cost is an amount used as a surrogate for cost or depreciated cost at a gi en date. @eemed cost forms the basis for the cost of the asset under (#R! at the date the aluation was performed and not the date of transition. @epreciation under (#R! is determined from the date deemed cost is applied up until the date of transition. *n adjustment is recogni:ed in retained earnings if the amount recogni:ed under (ndian $**= is materially different to the amount that would ha e been recogni:ed under (#R!. E%9-$D44 54'43+7) ?nder (*! 11 Cmployee ,enefits. pension plans are classified as either defined contribution plans or defined benefit plans. *ccounting for defined benefit plans is significantly more comple0 than for defined contribution plans. =ro isions for defined benefit plans are calculated on the basis of a number of actuarial assumptions. and cumulati e actuarial gains and losses are recogni:ed in accordance with (*! 11. (#R! 1 re/uires that the entity identify all defined benefit plans and compares (ndian $**= with (*! 11. *ny changes in applied accounting policies are made retrospecti ely e0cept for an optional e0emption concerning actuarial gains and losses and the accumulated effect of the changes is taken to e/uity in the opening balance sheet. C1%1-&7+84 7r&')-&7+$' 2+334r4'/4) 'n translation of a foreign operation in accordance with (*! 21 The Cffects of "hanges in #oreign C0change Rates. certain e0change differences are recogni:ed as a separate component of e/uity as well as re/uires to disclose reconciliation of the opening and closing balances. ?nder (#R! 1 a first-time adopter may elect not to calculate this translation difference retrospecti ely and thereby set corresponding translation differences at the date of transition. determined in accordance with pre ious $**=. to :ero. The gain or loss on subse/uent
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disposal of a foreign operation then includes only foreign e0change differences that arose subse/uent to the date of transition. C$%9$1'2 3+'&'/+&- +')7r1%4'7) The general principle in (#R! 1 re/uires a first-time adopter to apply (*! +2 retrospecti ely and separate all compound financial instruments into a debt and e/uity portion. The classification of the components is based on conditions that e0isted at the date when the instrument first satisfied the criteria for recognition in (*! +2 without considering e ents subse/uent to that date. (f the liability component is no longer outstanding at the date of transition. retrospecti e application of (*! +2 results in two categories of e/uity. the cumulati e interest in retained earnings and the original e/uity component. A))47) &'2 -+&5+-+7+4) $3 )15)+2+&r+4) (f a subsidiary makes the transition to (#R! at a later point in time than its parent. the subsidiary may in its own opening (#R! balance sheet continue with the same carrying amounts that are used in the parent9s consolidated financial statements before any consolidation adjustments. *lternati ely. the subsidiary itself may choose to apply (#R! 1 at its date of transition. * similar election is a ailable to an associate or joint enture that becomes a first-time adopter later than an entity that has significant influence or joint control o er it. The associate or joint enture may then continue with the same carrying amounts that were used as a reporting basis under (#R! by the entity that has significant influence or joint control o er it. D4)+('&7+$' $3 9r48+$1)-D r4/$('+E42 3+'&'/+&- +')7r1%4'7) (*! +1 #inancial (nstruments- Recognition and 7easurement permits an entity to designate a financial asset or financial liability as at fair alue through profit or loss or as a ailable-for-sale. @espite this re/uirement. (#R! 1 permits a first-time adopter. at the date of transition. to designate a financial asset or financial liability as at fair alue through profit or loss or as a ailable-for-sale. The basis for this e0emption is that a first-time adopter applied pre ious $**= at the date of initial recognition and would therefore not ha e been able to take
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ad antage of the election. which was a ailable to entities already reporting under (#R!. (f an entity uses this e0emption it shall disclose certain information. S*&r4-5&)42 9&D%4'7) * first-time adopter has an option not to apply (#R! 2 !hare-based =ayment retrospecti ely to e/uity instruments 4e/uity-settled transactions6 granted on or before A )o ember 2002. (#R! 1 pro ides an additional e0emption from retrospecti e application of (#R! 2 for e/uity instruments that were granted after A )o ember 2002 and that ested before the later of 4a6 the date of transition and 4b6 1 %anuary 2002. (f a first-time adopter elects to apply the e0emption it is ne ertheless re/uired to disclose information that enables users of the financial statements to understand the nature and e0tent of share-based payment arrangements that e0isted during the reporting and comparati e periods. I')1r&'/4 /$'7r&/7) (n contrast to the general principle of (#R! 1. an entity issuing insurance contracts 4insurer6 may elect on first-time adoption to apply the transitional pro isions of (#R! ; (nsurance "ontracts. These transitional pro isions re/uire an insurer to apply (#R! ; prospecti ely for reporting periods beginning on or after 1 %anuary 2002 with optional earlier application. C*&'(4) +' 4C+)7+'( 24/$%%+))+$'+'(: r4)7$r&7+$' &'2 )+%+-&r -+&5+-+7+4) (n terms of (#R(" 1 "hanges in C0isting @ecommissioning. Restoration and !imilar >iabilities. changes in the estimated timing or amount of the outflow of resources embodying economic benefits re/uired to settle an e0isting decommissioning. restoration or similar liability. or a change in the discount rate. shall be added to. or deducted from. the cost of the related asset. The adjusted depreciable amount of the asset is depreciated prospecti ely o er its remaining useful life. #or a first-time adopter. retrospecti e application of these re/uirements would re/uire an entity to construct an historical record of all such adjustments that would ha e been made in the past. which in many cases will not be practicable. M&'2&7$rD 4C/497+$') (#R! 1 contains four mandatory e0ceptions to the general principle of retrospecti e application.
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 D4r4/$('+7+$' $3 3+'&'/+&- &))47) &'2 3+'&'/+&- -+&5+-+7+4) #inancial assets and liabilities shall be recogni:ed and measured in the opening (#R! balance sheet in accordance with the ersion of (*! +1 that is effecti e on the reporting date. 8owe er. a first-time adopter may elect to apply the (*! +1 derecognition re/uirements retrospecti ely from an earlier date pro ided that the information re/uired to do so was obtained at the time of initial accounting for the transaction. H42(4 &//$1'7+'( * first-time adopter is re/uired in its opening (#R! balance sheet. to7easure all deri ati es at fair alueH and Climinate all deferred gains and losses arising on deri ati es that were reported under pre ious $**= as assets and liabilities. (n terms of (*! +1 a hedging relationship only /ualifies for hedge accounting if a number of restricti e criteria are satisfied. including appropriate designation and documentation of effecti eness at inception of the hedge and subse/uently. *s a result. in order for a hedging relationship to /ualify for hedge accounting at the date of transition. the hedging relationship must ha e been fully designated and documented as effecti e in accordance with (*! +1 at the date of the transaction * first-time adopter may under pre ious $**= ha e deferred or not recogni:ed gains and losses on a designated fair alue hedge of a hedged item that is not measured at fair alue. (n that case the hedged item is adjusted in accordance with the implementation guidance to (#R! 1. (f the forecast transaction is not highly probable. but is still e0pected to occur. the entire deferred gain or loss is recogni:ed in e/uity. A//$1'7+'( 4)7+%&74) *ccounting estimates re/uired under (#R! that were made under pre ious $**= are not adjusted e0cept for differences in accounting policies or unless there is objecti e e idence that they were in error. Jhen restating the opening (#R! balance sheet. the entity may ha e information a ailable that was not a ailable at the time the estimate was made. The primary objecti e of this e0ception is to pre ent entities from adjusting estimates that were made. based
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on the circumstances and information a ailable at a particular date. with the benefit of hindsight. *n estimate re/uired under (#R! that was not re/uired under pre ious $**= should reflect conditions that e0ist at the date of transition. (n particular. estimates of market prices. interest rates or foreign e0change rates shall reflect market conditions at the date of transition. A))47) /-&))+3+42 &) *4-2 3$r )&-4 &'2 2+)/$'7+'142 $94r&7+$') Retrospecti e application of (#R! 2 re/uires an entity to re erse depreciation on non-current assets classified as held for sale from the date those assets satisfied the held for sale criteria. 8owe er. an entity that has a date of transition prior to 1 %anuary 2002 shall not re erse pre ious depreciation of non-current assets classified as held for sale because it applies (#R! 2 prospecti ely in accordance with the transitional pro isions of (#R! 2.

The transitional pro isions of (#R! 2 re/uire prospecti e application from 1 %anuary 2002. 8owe er. if the aluation and other information needed to apply (#R! 2 retrospecti ely was obtained at the time the non-current assets originally met the criteria to be classified as held for sale. an entity may select an earlier date from which (#R! 2 is applied prospecti ely.

Pr4)4'7&7+$' &'2 2+)/-$)1r4 r4F1+r4%4'7)H The first (#R! financial statements shall be presented in accordance with the presentation and disclosure re/uirements in (*! 1 =resentation of #inancial !tatements and the other standards and interpretations under (#R!. * number of reconciliation between pre ious $**= and (#R! are re/uired in the first (#R! financial statements. These include reconciliation of e/uity at the date of transition and the beginning of the current reporting period as well as of the net profit or loss for the comparati e period as illustrated below for an entity with a reporting date of +1 7arch 2010 disclosing one year of comparati es. #urthermore. supplementary e0planations necessary for understanding the transition to (#R! are also re/uired in the first (#R! financial statements. The reconciliation
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shall distinguish between errors made under pre ious $**= 4if any6 and adjustments arising due to changes in accounting policies.

I'74r+% r49$r7+'( (#R! does not re/uire an entity to publish interim reports. (f. during the reporting period. the entity elects to prepare interim reports under (*! +;. (#R! 1 re/uires a range of further information in the interim report. including reconciliation between pre ious $**= and (#R! as well as presentation of restated comparati e information in accordance with (*! +;. C$%9&r&7+84 +'3$r%&7+$' To comply with (*! 1 an entity9s first (#R! financial statements shall include at least one year of comparati e information under (#R!. (f an entity elects or is re/uired to present more than one year of full comparati e information prepared in accordance with (#R!. the date of transition is the beginning of the earliest period presented. *ll comparati e information subse/uent to the date of transition is restated and presented in accordance with (#R!. (f an entity presents more than one year of comparati e information not in accordance with (#R!. the entity shall a6 label the pre ious $**= information clearly and b6 pro ide /ualitati e disclosure of the nature of the main adjustments that would make the information (#R! compliant. O7*4r 2+)/-$)1r4) r4F1+r42 5D IFRS # * first-time adopter is re/uired to disclose the fair alue and the classification and carrying amount in the pre ious financial statements of financial assets and financial liabilities that are designated either as at fair alue through profit or loss or as a ailable-for-sale.
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(f the election to use fair alue. re alued amount or an e ent dri en alue is applied to an item of property. plant and e/uipment. in estment property or intangible asset. the following disclosure is re/uired in the entity9s first (#R! financial statements-

*ggregate of those fair aluesH and *ggregate adjustment to the carrying amounts reported under pre ious $**=. I'2+&' GAAP*ccounting principles should be consistent for financial information presented in comparati e financial statements. ?! $**= does not gi e specific guidance on first-time adoption of its accounting principles. 8owe er. first-time adoption of (ndian $**= re/uires full retrospecti e application. !ome standards specify the transitional treatment upon firsttime application of a standard and specific rule for car e-out entities and first-time preparation of financial statements for the public. There is no re/uirement to present reconciliation of e/uity or income statement on first-time adoption of (ndian $**=.

CONCLUSION
Though con ergence with (#R! will impro e the o erall financial reporting and transparency of companies and safeguard the interests of stakeholders. there are arious challenges which (ndian (nc will ha e to face while con erging with (#R!. The major challenge is to train the staff according to new accounting standards and to make sure that there is proper mechanism for implementing such strategy. ("*(. *!, and go ernment ha e taken arious steps and ha e drafted proper implementation strategy to ensure effecti e and efficient con ergence of (-$**= to (#R!.

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REFERENCES
BOOKS 1. Ta0mannIs M!tudentIs $uide to *ccounting !tandardsN ,y @. !. Rawat 2. =aper on M"oncept =aper on con ergence with (#R!s in (ndiaN by (nstitute of "hartered *ccountants of (ndia 4("*(6 +. Research report on (#R! by @elloitt ;. Research report on (#R! by E=7$ WEBSITES 1. www.iasplus.com 2. www.caclubindia.com +. www.wikipedia.com ;. www.feeismind.com
2. www.icai.org

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